Week ending 16th April 2021.

As you can see from the accompanying table, the FTSE-100 ended the week above the 7,000 level – a level not seen since 26 February 2020 and a far cry from the sub-5,000 level it fell to in those dark and uncertain times last March.

While this is undoubtedly great news as it reflects the economic recovery we have been writing about in these commentaries, the index still remains well below its all-time high of 7,877.

However, the UK’s aggressive and successful vaccination programme; rapidly improving consumer confidence as the economy reopens; an index that is cheaper than its global peers on most valuation metrics; and an economy that is set to be one of the fastest growing over the next couple of years, should hopefully provide a sustainable tailwind to hone in on that all-time high.

Having said that, we have often highlighted how fickle financial markets can be in these Weekly Market Summaries and it was particularly telling that all the major global equity markets ended the week nicely higher- that is with the exception of China.

Judging by the knee-jerk response, Chinese equities were clearly unimpressed by the fact that Q1 GDP growth came in at ‘just’ 18.3% as this was below consensus estimates of 18.5%!

To us, when talking about economic growth of this magnitude, the chances of a miss increases significantly – and so for us, a miss of just 0.2% on estimates of 18.5% shouldn’t really have had much of an impact, especially when almost all the economic data releases at the moment are being distorted by the declines we saw 12 months ago.

Furthermore, and at the very least, it provides additional confirmation that the global economic recovery is picking up steam as economies gradually reopen.

Besides, today’s (16 April 2021) Chinese retail sales data was arguably much more important as this has been lagging the recovery we have seen elsewhere in Chinese data – and it showed an impressive super-sized gain of 34.2%, far outstripping economists’ estimates of 28%.

There was also plenty of other arousing economic data released this week.  For example, in the US, the Fed’s Beige Book upgraded its view of the economic recovery to ‘moderate’ from ‘modest’, while the weekly US initial jobless claims fell to 576,000, which is especially positive as it is the lowest reading since the coronavirus outbreak.

However, it was the US retail sales reading that got us totally excited:  clearly helped by both the quickening rollout of vaccines and their $1,400 payments from Joe Biden’s fiscal stimulus, US retail sales leapt a whopping 9.8% in March – smashing estimates of just 5.8%.

Looking ahead to this coming week we have PMI data for the US, UK, Eurozone and Japan; UK employment data (unemployment rate and weekly earnings); UK CPI inflation; UK retail sales; and an ECB monetary policy meeting.

Investment Management Team

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