UK industrial output hit by low oil prices and strong pound

• US investors cautious as earnings season nears full swing;

• Lacker and Kocherlakota speeches key today;

• European markets buoyed by Greek IMF payment;

• UK industrial output hit by low oil prices and strong pound.

US futures look relatively unchanged from yesterday’s close as we look to end the week on a slightly quieter note.

It’s not just the lack of economic data and news flow that could make today one of the more uneventful, corporate earnings season gets into full swing next week and investors are genuinely worried about how bad it will be. I wouldn’t say they’ve become bearish on US stocks at this stage but I do think there’ll be an element of caution about them as the results start to pour out.

There are so many factors working against corporates in the first quarter of the year, a stronger dollar diminishing overseas returns, unseasonably poor weather and low commodity prices, particularly in the oil sector. It’s basically a write off quarter, the best we can hope for is that companies have come out of it relatively unscathed and in a position to capitalise on the next couple of quarter, when the US consumer should have a little extra cash to throw around.

One thing we do need to watch out for today is speeches from Fed members Narayana Kocherlakota and Jeffrey Lacker, the latter of which is a voting member of the FOMC. Expectations for the first rate hike range from June to 2017 depending on who you talk to which strongly suggests that the Fed is not doing enough to prepare the markets.

The removal of patience from its statement last month meant it was no longer committed to keeping rates the same for two months, but many people still think it will be much longer than that. The data dependent line that is constantly used doesn’t really tell us what they are looking for and results in forecasts being all over the place, as we now see. That leaves the markets open to excessive volatility when we do get comments from Fed members, particularly FOMC voters, and therefore it’s worth paying close attention to what is said.

European indices are continuing to push to new record highs this morning, aided by Greece’s repayment of €450m to the IMF yesterday. It now also looks likely that it will be able to pay next week’s T-bill and therefore the pressure on it to secure further bailout aid immediately has eased. That said, the issue has far from gone away and it’s only a matter of time until Greek risks are on the rise again. For now, investors are more than happy to take advantage of the brief period of calm and get back on board the rally.

It’s been a disappointing quarter for the UK for industrial output with lower oil and gas prices and the stronger pound contributing largely to the fall. Today’s figures confirmed this, with production rising only marginally on the month and rising at a slower rate on the year. Despite the sector only contributing around 15% to the economy, it is likely to weigh on growth in the first quarter although it should still be a good year as a whole. The services sector is far more important to the economy and this is expected to perform very well this year, with the additional disposable income in the pocket of the consumer as a result of lower oil prices helping to drive this.

The S&P is expected to open 1 point higher at 2,092, the Dow 13 points higher at 17,971 and the Nasdaq 2 points higher at 4,405.