Pound Down, Stocks Up Ahead Of Fomc Meeting
We’ll get a preliminary look at UK GDP data for the first quarter on Tuesday, but just ahead of that report, a survey conducted by the Confederation of British Industry (CBI) points to a slowdown in the UK economy.
Monday, April 27, 2015 - 00:00
The CBI’s industrial trends survey for April reported a decline in new export orders and revealed that manufacturers’ plans for investment have fallen to their weakest in a year.‘It’s disappointing that a sluggish exports market has taken some of the steam out of manufacturing growth, which was going from strength to strength throughout most of this year,’ said Rain Newton-Smith, the CBI Director of Economics. ‘However, growth in orders and output is expected to continue ahead, albeit with expectations moderating, and domestic orders have continued to rise at a healthy pace. And it is encouraging that job numbers are growing. Nevertheless, the manufacturing sector is clearly facing headwinds. Global political instability, mounting concerns about weakness in the Eurozone and recent rises in Sterling are all weighing on export demand.’
The survey will dampen expectations for Friday’s UK manufacturing PMI and because of the pro-cyclical nature of the manufacturing sector, the CBI’s indications of softness in UK manufacturing will, if anything, be pushing out expectations for when the Bank of England might tighten. GBP/USD fell 0.38% to 1.5130 in early trading today.
Central bank action will be at the forefront of attention for the US market this week, as the Fed begins its latest two-day FOMC meeting on Tuesday. The announcement is due on Wednesday afternoon and while no change in policy is expected, it will be interesting to see what the committee says in its statement regarding current economic conditions, which have looked rather gloomy, and whether there is any change in the language regarding the outlook for policy normalization.
The US stock market performed strongly last week, pushing the S&P 500 to a record close on Friday. The tech-focussed NASDAQ 100 had a great week, achieving higher closes each day, helped by upbeat earnings from such technology luminaries as Amazon, Google and Microsoft. The tech earnings continue on Monday with the release of Apple’s ($AAPL) second-quarter results after the market closes. As always, iPhone sales will be a crucial metric, particularly performance in China, and it will be interesting to hear any commentary from the company on how the Apple Watch launch has progressed. Expectations are for earnings of $2.16 per share on revenue of $56.06 billion, according to Thomson Reuters.
Stocks have begun the week in a similarly upbeat fashion to how they finished the last, making moderate gains in early trading. Shortly after the open, the Dow Jones was up 0.29% or 52 points at 18,131, while the S&P 500 rose 0.19% to 2121.7.
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