A Solid End To The Week

Global stocks were moving to towards the end of the week in a positive manner as risk on dominated. Investors cheered a double whammy of stronger than forecast Chinese data, which soothed investor concerns over the slowing global growth outlook. Plus improving prospects of a US– Sino trade deal, although weak US data encouraged some profit taking late afternoon.

Early gains in Europe were pared back later in the day, with the Dax going from 1.2% gains to 0.7%. Meanwhile, the FTSE traded 0.4% higher moving towards the close. The Dow kicked trading off in March jumping 100 points northwards after the three main US indices posted solid monthly gains in February. With US and China moving closer to a trade deal and the prospect of any fed hike being pushed back US equity bulls are still in charge.

Pound recovers on US dollar weakness
The pound spent the morning trending lower after manufacturing PMI data depicted a darkening outlook. The data showed that British factories are cutting jobs and stockpiling at a record pace ahead of Brexit. The UK manufacturing pmi hit a four-month low in February at 52 on the index, a figure which would have been much worse had it not been for the panic to build inventories over fears of a no deal Brexit.

Whilst optimism has increased over the past few days that a no deal Brexit could be avoided, this won’t be reflected in the data released today. The possibility of an extension to Brexit is also being aired around Parliament. Whilst this could ease concerns over a no deal Brexit, it also extends the uncertainty under which businesses are having to operate. This means that business investment could remain depressed at levels not seen since the financial crisis. 

The softer than forecast UK manufacturing figures saw the pound extend losses to $1.3219. However, a slew of weaker than forecast US data was on hand to pull the dollar southwards and boost the pound this afternoon. A sharp fall in US manufacturing activity and an unexpected decline in University of Michigan confidence figures saw the dollar give up post GDP gains.

Canadian economy on the brink
Whilst the dollar was moving broadly lower, this wasn’t the case versus the Canadian dollar. The Canadian dollar tumbled following weaker than forecast GDP data. Canada’s economy practically ground to a halt in the final quarter of 2018. The country’s economy grew by just 0.1% in the final three months of last year, resulting in an annualised pace of just 0.4%. Whilst a slowdown was anticipated, thanks in part to falling oil prices, the market was not expecting the worst quarterly performance in two and a half years as weakness spread well beyond the energy sector.