Market Update

Following last week’s decision to delay the UK’s withdrawal from the EU until the end of October, UK politicians took a break for Easter this week. With Brexit once again postponed, the urgency to reach an agreement on the withdrawal has diminished. However, if an agreement is not reached by the latter part of next month, the UK may participate in European parliament elections. Parties have started their campaign preparations, and Nigel Farage launched his new “Brexit Party” this week. The large pro-Brexit vote expected could pose challenges for the government in the coming weeks.
There was positive news for the UK labor force this week, as the number of people employed reached a record high. Unemployment remained at 3.9%, its lowest level since 1975. Data also revealed strong wage growth at 3.5%, close to an 11-year high. UK Consumer Price Index (CPI) inflation was at 1.9%, lower than expected but consistent with subdued figures globally. Wages rising faster than inflation boosts consumers, whose spending drives the British economy. This spending was evident in UK retail sales, which increased for a third consecutive month in March, surpassing estimates and demonstrating consumers' resilience despite Brexit uncertainty.
Chinese GDP data surprised on the upside this week, with the economy reported to have grown at 6.4% over the past 12 months, exceeding estimates of 6.3%. Other Chinese data, including retail sales and industrial production, also exceeded estimates, indicating that the Chinese economy is benefiting from reduced trade tensions with the US and government stimulus measures taking effect.
US retail sales also exceeded expectations this week, rebounding from a negative figure last month. In summary, economic data was broadly positive; the lack of inflation eases pressure on central banks to tighten monetary policy, and other data points indicate reasonable global economic growth.
On a different note, The Mueller Report is worth mentioning. US Attorney General Bill Barr published a redacted version of the report on Thursday, investigating Russian interference in the 2016 US Presidential Election. The published content is inconclusive, with both sides interpreting the findings to suit their agendas. Special Counsel Robert Mueller expressed hesitancy in clearing Donald Trump of obstruction of justice but suggested Congress could take action on at least 10 instances where the president sought to interfere with the probe. These findings conflict with Bill Barr’s statements, indicating disagreement with Mueller’s conclusions. Similar to Brexit, expect this story to continue for some time.
Next week, important data releases include US GDP and core Personal Consumption Expenditures (PCE), the Fed’s preferred measure of inflation, UK public finance data, and in Japan, we have monetary policy, industrial production, and retail sales figures to look forward to.