The coming week will focus on key economic indicators on both sides of the Atlantic. While in the EU the focus is on inflation statistics, in the US the focus shifts to employment statistics. These key indicators provide insight into the health of the economy and shape market sentiment.
advertisementEuropean stock markets extended their winning streak in March, posting their fifth consecutive month of gains and capping off a remarkable first quarter of 2024.
Focus on EU inflation and US employment statistics
The Euro Stoxx 50 and DAX maintained their momentum, hitting new record highs as investors anticipated a possible interest rate cut by the European Central Bank (ECB). The U.S. stock market also ended the month on a strong note, with increased interest in artificial intelligence (AI) contributing to positive market sentiment.
But debate has emerged over whether the stock market can sustain its bull run, as concerns about profit taking and a potential tech depletion could lead to a market correction.
This week, investors’ attention will be focused on two key economic indicators: European Union inflation and US employment data. These indicators are very important because they serve as important metrics for central banks to decide on monetary policy. Additionally, major economies such as the EU, UK, and US are expected to release their final Manufacturing and Services Purchasing Managers Index (PMI) data, providing further insight into the health of their respective economies.
Most major stock exchanges, including those in Europe, Australia and New Zealand, remain closed, but U.S. markets will resume trading on Monday.
EU
This week, the euro zone is scheduled to release its consumer price index (CPI) for March, seen as a crucial economic indicator that influences interest rate decisions by the European Central Bank (ECB). Given the stagnation of the regional economy throughout 2023, the ECB is at an important crossroads in reevaluating its financial stance.
The headline inflation rate fell to 2.6% in February from a year earlier, the lowest level in three months. The main factor behind this slowdown in consumer price growth was the decline in energy prices. Core inflation, which excludes food and energy, rose 3.1%, also the slowest growth since March 2022. Future data is expected to be influenced by the recovery in energy prices in the first quarter. This could delay the ECB’s decision to start cutting interest rates and limit stock market gains.
In addition, major economies in the region including Germany, Spain, Italy and France are scheduled to release their final manufacturing PMI data for March this week. Initial estimates show that manufacturing PMI remains in contraction territory in all these countries, but there is hope that the pace of expansion in services PMI will stabilize in Spain and Italy.
Germany will show the weakest growth of these economies, with a second consecutive quarter of negative growth expected in the first quarter of 2024. Germany’s manufacturing PMI in March fell to its lowest level in five months, according to early data. The country’s services PMI rose slightly from last month, but remains in contraction territory. Additionally, Germany is set to announce factory orders for February, with data showing that orders for January were down 11.3% month-on-month. However, there is optimism that the number will recover, with sales expected to rise by 1% in March.
America
Wall Street ended the quarter on a positive note, with the S&P 500 up 10.2%, the Dow Jones Industrial Average up 5.6%, and the Nasdaq Composite Index up 9.1%. The U.S. Federal Reserve is expected to maintain interest rates until inflation matches its target level of 2%, but market participants are predicting the central bank will begin a rate-cutting cycle in June. ing.
This week, all eyes will be on the March U.S. non-farm employment data, which is seen as an important indicator for the Fed’s decision on interest rates. The U.S. unemployment rate remained flat at 3.9% in February, indicating the labor market remains tight. Consensus estimates predict that around 200,000 new jobs will be added in March, with the unemployment rate unchanged. However, the pace of increase in average hourly wages may slow, with the average hourly wage expected to increase by 4.1% compared to 4.3% last month. Nevertheless, despite signs of gradual easing, employment data is likely to contribute to sustained inflationary pressures.
Other data revealing the US economy is the ISM Manufacturing and Services PMI. Manufacturing activity has followed a similar trajectory to its global peers, with February’s data marking the 16th consecutive month of negative growth. Future statistics show that the downward trend is likely to continue due to high interest rates and inflationary pressures.
England
The UK stock market ended the quarter with a modest 2.6% gain, but underperformed its global peers, with mining stocks weighing on the overall performance. However, signs of recovery in commodity prices could inject bullish sentiment into the market, which could particularly benefit mining and energy stocks.
The outlook for the country’s economy is relatively calm, with key data focusing on the PMI for final manufacturing and services. Notably, initial estimates showed UK factory activity rose to a 21-month high in March, almost reaching expansion territory. Furthermore, services PMI is expected to continue expanding for the fifth consecutive month.
Asia
Asia Pacific will also experience a lighter week, as Australia and New Zealand will have a shorter Easter Monday week. China will also begin a three-day public holiday starting Thursday as Tomb Sweeping Day. Key events in the region include the Reserve Bank of Australia (RBA) meeting minutes and the release of Japan’s February household spending data.
