A mixed set of economic and corporate news has brought a new wave of uncertainty to the markets. While China’s economic growth has accelerated, so too has UK wage growth which puts the Bank of England in a difficult situation.
It muddies the water with regards to the situation with inflation and hopes that the central bank would have enough reasons to stop putting up interest rates,” says Russ Mould, investment director at AJ Bell.
“The Bank might argue the situation is a watching brief, not firm evidence of a trend with wage growth, and so it needs more data points before making any big decisions.
“As for China, the relaxation of Covid restrictions was always going to result in stronger economic activity. The key question is for how long it can sustain this momentum. GDP grew by 4.5% in the first three months of the year.
“A suggestion last week that US banks hadn’t been badly affected by the recent crisis in the financial sector looks a bit premature. State Street has fallen victim to a rush of depositors withdrawing money either to park in a different bank or in lower-risk investments such as money market funds or government bonds. The same thing has happened with Charles Schwab and M&T.
“Competition is heating up in the deposit market which means banks are going to have to offer better rates to attract and retain customers, while at the same time we could see banks become pickier over the type of customer to whom they are prepared to lend money, suggesting that earnings in the sector could become less attractive.
“While Asian markets were mixed, Europe saw small gains across the main indices. The FTSE 100 nudged up 0.3% to 7,903 thanks to strength in miners off the back of the better-than-expected China GDP figures.”