Following on from yesterday’s gloomy US retail figures the Dow Jones duly opened lower, down a modest 0.5% in early trading, while the broader S&P 500 was similarly 0.6% off the pace. But it wasn’t all bad news.
The raft of key economic data from the US contained the expected gloomy news, but also more positive news too, including the somewhat unexpected announcement that the US consumer price index dropped 0.1% in March against a 0.4% rise in February. This fall means that consumer prices experienced the first annual decline since 1955. However, US government data also showed that industrial production fell for the fifth consecutive month to a ten-year low.
Analysts from Barclays Capital were among the few who had correctly predicted the fall in US consumer prices, saying: ‘If our forecasts are correct, the stronger production and lower prices are likely to be mildly supportive of risky assets: lower prices means more scope for continued policy stimulus.’ [1]
By around 3.20pm (London time) the Dow Jones Industrial Average had rallied and was up 29.47 points (+0.37%) while the S&P was 1.49 points (+0.92%) up on the day. The FTSE 100 experienced a mixed morning, falling then rising as the downward financial and mining sectors (Lloyds, Fresnillo) did battle with a resurgent oil and gas sector (BG Group). However, at 3.00pm (London time) the FTSE was down just over 25 points (-0.64%) on the day. #
Meanwhile the pound was less flat, rallying against the dollar to reach just above the $1.50 mark, its highest level in three months, and a six-week high against the euro to E1.13. This followed the publishing of a survey from the Royal Institution of Chartered Surveyors suggesting that house sales would pick up.
In a Bloomberg survey of confidence in the Global Economy, Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ in New York, has suggested there is light at the end of a long tunnel: ‘The outlook was completely hopeless a month ago and now there’s a slight ray of hope that a recovery in financial markets will lead to a recovery in the broader economy. Things are not as gloomy as before. We will improve slowly, probably in fits and starts.’ [2]
Following the Obama administration’s promise to disclose data on the health of all the US’s biggest banks earlier this week, investors can top-up their knowledge with the first-quarter earnings report of JP Morgan Chase scheduled for release tomorrow. Friday sees the release of General Electric’s first quarter earnings, which is always a useful temperature gauge for the global economy.
[1] Source: Bloomberg News (15 April 2009)
[2] Source: Financial Times (15 April 2009)
By Anthony Grech, Research Analyst, IG Index
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