UK first quarter GDP data up next

Good morning,

• Traders still lacking appetite for risk;

• Alcoa gets earnings season underway after the closing bell;

• UK first quarter GDP data up next;

• BoJ holds off on further stimulus as expected.

European indices are under pressure again on Tuesday, while US futures are currently treading water with the S&P down 2 points, the Dow down 13 points and the Nasdaq down 1 point.

There’s a clear lack of appetite for risk among traders at the moment and there’s plenty of things you could blame this on, whether it be the underwhelming data from the US, the Fed’s ongoing tapering, the flare up in Donetsk, the slowdown in China, the overvaluation of certain parts of the stock market or the low expectations as we head into another corporate earnings season. To be fair, any of these would be a legitimate reason for traders to be a little risk averse. The problem we have on top of this is that there’s very little to be positive about.

We had a whole host of economic data and announcements last week that could have given investors a reason to be more optimistic but there was nothing that blew us away. The US jobs report on Friday showed a good number of jobs created in March but coming off the back of three poor months, it needed to be much better. The European Central Bank could have been the catalyst that spurred the next push higher in stocks, but once again the central bank opted to hold off, despite inflation now running at 0.5%.

Instead, all we now have to look forward to is a mediocre earnings season and hopefully a gradual improvement in the economic outlook. Alcoa gets earnings season underway today, reporting its first quarter earnings after the opening bell. The aluminium giant, formerly a constituent of the Dow 30, may no longer be viewed as a bellwether for the stock market or the economy, it is the first major company that reports earnings and people still monitor this for an indication of how the earnings season is shaping up.

This week is looking pretty quiet from an economic data perspective, with today offering very little that would ordinarily have much impact on the markets. The only notable release left today is the UK NIESR GDP estimate for the previous three months, which on this occasion is the first quarter of the year. This is therefore the first estimate we’ll get of GDP growth in the quarter so can have a greater market impact. As long as the number is roughly in line with that of the last six months, 0.7-0.8%, I think traders will be fairly pleased. Anything above could lift expectations ahead of the first official release.

The data released already this morning has actually be quite positive, although you can only really see that reflected in the pound, with the FTSE currently down 0.7%. The pound on the other hand responded very positively to the manufacturing and industrial production figures, which were significantly better than expected on both a monthly and yearly basis. Given that this industry was previously viewed as a weak point for the UK, with the country overly reliant on its services industry, this is very encouraging.

The Bank of Japan meeting over night was something of a non-event, with the central bank holding off on announcing an increase to its quantitative easing program. There had been suggestions that the BoJ could act in anticipation of an economic slowdown in response to last week’s sales tax hike, but that never materialised. Instead the tone of the press conference after suggested that the central bank will wait until the third quarter before acting, which would give them a chance to see what impact the tax has on the data and whether there’s a risk of the country falling into recession, as it did the last time the tax was raised.