The outlook for economic growth is front and centre for markets this week as we get a series of data releases which should have a major influence on central bank monetary policy.
Laith Khalaf, head of investment analysis at AJ Bell, said: “There are three data points on Tuesday, Thursday and Friday covering the health of the US jobs market which has so far been solid as a rock despite rising interest rates making life harder for businesses.
“First up, today we have eurozone figures on second quarter GDP and inflation, both expected to show modest gains. With the European Central Bank having last week raised rates to a 23-year high, it has decided to follow the Federal Reserve by saying future decisions will be heavily influenced by data.
“Markets are waiting for both central banks to take their foot off the accelerator pedal when it comes to interest rates, yet most investors seem to accept that we could still see more hikes in the coming months, particularly if labour markets and the economy remain resilient and inflation stays stubbornly high.
“One country performing below expectations is China. Manufacturing data out today shows the sector is still contracting, with July’s PMI reading at 49.3, albeit up from 49 in June. A reading above 50 represents expansion and reading below 50 is contraction.
“Yet another weak economic reading from China will only stir up speculation that the government will have to roll out new stimulus measures, hence why Asian markets were trading ahead on Monday.
“The prospect of Chinese government support for construction and real estate markets gave a small lift to UK-listed mining stocks, including a 0.8% rise from Rio Tinto and a 0.4% gain from Glencore. However, that wasn’t enough to stop the FTSE 100 from slipping back 0.1% to 7,683. Technology, consumer-related companies and industrials acted as an anchor on the index and weighed it down.
“The appointment of Allison Kirkby as BT’s new chief executive did nothing to excite investors as the share price slipped 0.5% to 123.58p. She joins from Swedish telecoms group Telia and will be required to spend 500% of her salary on buying BT shares within five years of joining the company.
“That implies at least a £5.5 million investment based on a starting salary of £1.1 million a year. Kirkby also gets a cash allowance in lieu of pension contributions and generous bonuses on top. Shareholders will hope she breathes some life into the business, as it has been moping along for too long.
“Marshalls is getting into the nasty habit of issuing profit warnings and true to form along comes another one. High inflation, rising interest rates and weaker consumer confidence have combined to form a toxic cocktail for companies serving the repair, maintenance and improvement sector and new-build housing market.
“Dr Martens jumped 4% following reports that activist investor Sparta Capital had started to build a stake in the business. A fortnight ago, Dr Martens’ chief executive Kenny Wilson bought £399,999 worth of shares off the back of a more reassuring trading update versus previous ones over the past year or so. The company is hoping to improve performance in the Americas after a disappointing period.”