Economic events likely to impact UK and US markets this week

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.