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Week Ahead: Equity Markets Set To Post Monthly Losses

Published 24/02/2018, 08:08
Updated 03/08/2021, 16:15

Equity markets set to post monthly losses

After last week’s strong rebound from the recent lows, equity markets have struggled to maintain momentum this week and with month end approaching it seems likely that markets in Europe will see all the January gains wiped off. US markets may well fare slightly better but that doesn’t change the fact that all the January optimism of record highs, has taken a knock.

We’ll also get to see the first snap shot of how the latest February manufacturing sector surveys look like. Manufacturing PMI numbers have been strongly positive in recent months however last week numbers from February for Spain, Italy, Germany as well as France did show a bit of a slowdown. UK manufacturing is expected to remain steady from January’s 55.3.

Standard Chartered (LON:STAN) Bank FY17 results

The emerging markets focused bank has seen profits rebound and loan impartments drop dramatically, but the latest update failed to reinstate the dividend. It is showing all the right signs of returning to health, but shareholders always appreciate a cash return. The robust update in August was overshadowed by the lack of a dividend. Lloyds (LON:LLOY) and Barclays (LON:BARC) have promised to beef up their dividends, will Standard Chartered look to follow suit and bring back its dividend.

Chinese PMI’s – manufacturing and services

The second-largest economy in the world will reveal its manufacturing and non-manufacturing numbers for February. Expectations are for manufacturing to rise to 51.4 from 51.3 in January, while the consensus is for a reading of 55.2 for non-manufacturing, down from 55.3 in January. The manufacturing sector has been growing at a slower rate recently, but we should also keep in mind that Chinese New Year celebrations may skew the data for this month meaning any sort of data miss may well be inconclusive in terms of how the wider economy is doing.

EU flash CPI (Feb)

The lack of inflation in Europe has been one of the more puzzling aspects of the resurgence in economic activity across the region in recent months. Multi year highs in PMI’s has shown that growth is steady and that unemployment is falling, yet inflation has remained stubbornly low. Last weeks’ final CPI rate for January showed prices at 1.3% and core prices at 1%. While GDP suggests the economy is in rude health, consumer spending has remained subdued. With the ECB on course to exit its asset purchase program this year a higher euro will continue to cause problems for the ECB in meeting its inflation target.

US preliminary Q4 GDP and core PCE

The latest minutes from the January Federal Reserve meeting showed us that policymakers remain optimistic that the bank can meet its inflation target of 2%. The decline in the US dollar will no doubt help in this regard but we still remain well below the banks central target. Core PCE which is the Feds preferred inflation measure is currently at 1.5%, but still below where it was this time last year when it was at 1.8%. The latest iteration of Q4 GDP is expected to show the US economy grew at 2.5% down from the previous reading of 2.6%.

Capita (LON:CPI) FY17 results

Capita’s share price plunged last month when the company issued profit warning, halted their dividend and declared they intend to raise £700 million via a rights issue. The company is servicing a high amount of debt, and is running a large pension deficit. Jonathan Lewis, the CEO is relatively new to the post is and has decided to administer the tough medicine. Investors will be looking for any updates to the turnaround and disposals plan announced at the end of last month and whether or not management have uncovered any other unpleasant nasties in the past few weeks.

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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