Economic events likely to impact UK and US markets this week

<p> The week has seen the FTSE 100, DAX and Dow Jones all gain between 3% – 4% as traders and investors alike bought into stocks […]</p>

 The week has seen the FTSE 100, DAX and Dow Jones all gain between 3% – 4% as traders and investors alike bought into stocks they felt had cheap valuations after succumbing to the previous week’s aggressive selling (see below chart on the FTSE 100).

The speed of the bounce higher this week has done much to reaffirm the feeling that investors remain confident that equity markets still have further upside to come. This point is emphasised by the fact that the Volatility Index, the market’s main gauge of trader fear or pessimism, fell by some 26% this week alone.

Daily FTSE Quarterly Chart
The Week Ahead
This week we focus on two aspects, the potential for investors to lock in their gains and a heavy calendar of economic data due out, culminating in non-farm payroll Friday.

The faster equity markets rise, the more enticing it is for investors to lock in their gains, particularly with a number of issues such as impending interest rate hikes, high oil prices and sovereign debt remaining in the foreground.

It is going to be important that should any bouts of profit-taking make its way into the markets, that we see investors use price dips as buying opportunities. This will help to reaffirm the early March falls as nothing more than a price correction. That said, it could be healthy for prices to begin to consolidate around these levels to reaffirm buyer support before a push higher in process. Before March’s falls, the FTSE 100 had been locked in a 250-point trading range between 5850 and 6100. It will be important to see the sharp recovery in prices help the FTSE 100 push on past the 6100 upper limit to the year’s trading range. Otherwise the status quo of the range may be endured even longer.

In terms of economic data, there is enough to trigger some volatility this week and so traders need to be on their guard. On Monday we have personal income and spending data before pending homes sales are released, both out of the US. Tuesday sees the final reading of Q4 UK GDP, whilst the afternoon sees US consumer sentiment. On Wednesday we have EU economic sentiment and the ADP employment change whilst Thursday sees US factory orders and Chicago PMI. And on Friday we finish with the usual first Friday of each month jobs reports, with keen eyes towards both non-farm and private payrolls along with the US unemployment rate. Early indications are that non-farm payrolls will grow around the 200,000 mark from February’s 192,000. This is likely to have a large impact in the near term not just on stocks but also on the US dollar.

Company Earnings
This week’s company’s earnings are unlikely to be major market movers but there is enough to keep an eye out for. Thomas Cook Group updates the market on Tuesday before the opening bell along with Kazakhmys. We also see half-year earnings from UK builder Wolseley. TUI Travel and Compass Group finish the week’s main crux of firms reporting on Thursday, leaving traders with a clean Friday to focus on the US jobs reports.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.