Weekly Digest - INVESTEC
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Capital markets finished the week strongly thanks in part to a robust outcome from the US economic data on Gross Domestic Product on Friday – Q1 growth was reported as 3.2%, compared with the range of 72 economists surveyed by Bloomberg of 1.0% to 2.9%. Bond markets took comfort from the Federal Reserve’s preferred measure of inflation, which was lower than forecast at 1.3%, and US government treasury bond yields fell. This week has a Federal Reserve meeting scheduled for Wednesday, so economists will be intrigued to see how Mr Powell’s language balances the strong growth (indicative of potentially higher rates) with sluggish inflation (keeping the door open for lower rates).
Equities in Wall Street hit another all-time high on Friday, thanks not only to the good economic data but also a positive results season so far. Of the 230 S&P constituents to report already, 78% by number beat consensus forecasts, by on average slightly more than 5%. There have been some exceptions, such as 3M and Intel (the only one of 25 tech companies to fall short of estimates). Another 164 companies within the S&P 500 are due to report in the week ahead, including names of particular relevance to us such as Alphabet (Google), Apple and Xylem. Closer to home, we will also be keeping a keen eye on BP, J Sainsbury, and Zalando who are also reporting.
Yesterday’s Spanish elections saw the centre-left PSOE party gain 123 seats, up from 85 previously; the centre-right PP was the biggest loser, despite coming second overall, with its seat count dropping from 137 to 66. With 350 seats overall in Parliament, nobody has anywhere near an overall majority so this looks like another coalition in the making. This morning’s market reactions are muted, suggesting the outcome was (for once in politics) pretty well in line with predictions.
Keeping the political theme going, this Thursday is local elections day for much of the UK. There are more than 8,400 seats up for grabs, and weekend papers were carrying stories suggesting the Tories are expected to lose as many as 1,000 of their current 4,900 councillors.