This morning, the release of Deloitte’s quarterly CFO Survey suggests that business sentiment has improved significantly.
Furthermore, the survey indicates that ‘perceptions of uncertainty’ have declined at the greatest rate in the 12 years history of the survey. Chief drivers of the rise in optimism was easing supply chain problems, easing recruitment problems and easing expectations of where inflation would be in a year’s time. The survey also suggested that concerns around Brexit related challenged had been alleviated by the Windsor framework resulting in CFO’s concerns around Brexit being at their lowest level in six years. Deloitte’s CFO, Ian Stewart also stated that “finance leaders report little change in credit conditions, suggesting that March’s events in the global banking system have not affected the pricing and availability of credit for UK corporates.”
Nevertheless, Notwithstanding the rise in optimism, CFO’s remain cognisant of the wider challenges that persist in the economy, and thus ‘maintain a defensive strategy stance’. This primarily involves a drive to reduce costs and build up cash.
The survey also highlighted how CFO’s are looking towards artificial intelligence to help increase productivity, and are expecting to see significant growth in the sector. This follows an article last month published by Goldman Sachs which suggested that AI could release the equivalent of 300,000,000 full time jobs globally. This, it said, could cause significant disruption to the labour market as two-thirds of jobs in the US and Europe are exposed to some level of automation.
This morning has seen the Shanghai Composite rise 0.8% to its highest level in nine-months as the Shenzhen index also rose 0.3%. This comes as investors weigh on China’s GDP print, released tomorrow where the general market consensus is expecting to see a print of 4% for Q1. This would mark a sizable increase from Q4 which saw a release of 2.9%.
Tomorrow’s release follows the CCP announcing their lowest growth target in decades. The 5% target for 2023 comes after a difficult year for China as far as growth is concerned with Beijing recording that the Chinese economy expanded just 3% over 2022. The Chinese Premier Li Keqiang citied a host of domestic and international reasons why growth will likely continue to be under pressure this year, not least China’s fragile property sector and fragile relations with Washington.
Lagarde: Today markets will chiefly be focusing on President Lagarde who is speaking at 18:00 this evening. Markets will be looking to gain any insight into her plans on the forthcoming ECB rate decision on 4th May following her weekend comments which stated that central bank policy makers and politicians have a ‘narrow path’ to tread between inflation, growth, and stability in the banking sector.
UK Labour Market: Tomorrow will also see the release of the UK’s unemployment rate which is expected to remain unchanged at 3.7%. The UK labour market continues to be tight with historically low levels of unemployment and high job vacancies and markets will be hotly anticipating the print in order to gain an insight into the health of the UK labour market in the run up to the BoE’s rate decision on 11th May.
UK Inflation: On Wednesday, Markets will be looking towards UK CPI which is expected to slip 0.4 percentage points to 10%. Last month, the UK’s inflation print indicated that headline CPI unexpectedly rose from 10.1% in January to 10.4% in February against market forecasts that UK inflation would fall from double digits for the first time since August. The 0.3 percentage point increase from January bucked the trend of a falling rate of inflation seen each month since November and reiterated the challenge that the BoE faces in bringing inflation back to their 2% target rate.
BoE Rate Decision: As we await the UK’s CPI Print and labour market data in the run up to Threadneedle Street’s decision on 11th May, according to a Bloomberg news survey more than half of economists now think the BoE will not from raise its key rate again.
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JP Morgan have made some interesting points in the last couple of days: speaking about the Fed meeting next week, they’re concerned that if the FOMC do press the pause button, but were then forced to resume rate hikes either in July, or after the summer, in the face of stubborn inflation, what would this do to risk appetite in the market, because it might be a bit unnerving to see that the central bank hasn’t got a firm grasp on the problem.
According to the Halifax house price index, the price of residential property fell for the first time since 2012. The 1% depreciation between May 2022 and May 2023 came in line with expectations as analysts assess the impact of higher interest rates on households.
The vast Ukrainian Nova Khakovka Dam has been destroyed in the Russian occupied region of Kherson, Ukraine releasing a torrent of water as concerns for residents and nuclear power facilities up and downstream grows.
Plans have been unveiled for a Universal Basic Income (UBI) trial in the UK, with the think tank Autonomy currently seeking financial backing. It is hoped that the trial will span over two years with participants receiving £1,600 each month and being in control of how they spend or save the funds.
Today all eyes are on US labour market data where the markets will be looking to gain an insight into the health of the US economy and the extent to which the jobs market is feeding into inflationary pressures ahead of the Fed’s meeting on 12 June.
Last night, the House comfortably passed the debt ceiling bill in arguably the most important stage in the process to ensure that the world’s largest economy averts a technical default. The House of Representatives cleared the Fiscal Responsibility Act by 314-117, the bipartisan deal assembled by President Joe Biden and House Speaker Kevin McCarthy.