The see-saw week in markets continues, with the FTSE 100 down 40 points so far in early trading, given back some of yesterday's gains.

  • PMI surveys point to limited improvement

  • UK economy still expected to suffer sharp contraction

  • Whitbread plunges after full-year numbers

While the situation in Europe is improving, according to PMI data, markets are looking tired once again. What was a straight-line move higher in late March has turned into a grinding contest of attrition between the bulls and bears, and while the buyers have the upper hand for now, expectations of a sharp pullback are on the rise. Having reiterated their ability to do more if needed, central banks have now little to do but wait to see how the data, both economic and infection rates, plays out; in this environment, modest improvements compared to last month's dire readings are unlikely to provide much fuel for further gains in stocks. Comments from Jerome Powell this evening could lift the mood, but it is not clear how much more he can say, having already laid down markers with respect to more policy action and ruling out negative rates in the US.

Some improvement in the UK figures has bolstered the pound as well, as cable looks to continue its recovery from Monday's lows. But with so little data to go on, we are essentially still very much in the dark. Until lockdowns are fully ended the data tells us little apart from the fact that economies are operating at a fraction of their overall capacity, something that can be gleaned merely from going for a walk outside.

Whitbread investors will be watching the share price closely today, as this morning's update sends the price plummeting 13%, back to the £24 area that has seen buying pressure develop over the past eight weeks. Having thrown the (reasonably-priced) hotel bathroom sink at the results, the market will hope that much of the bad news is now in the price, providing the space for the shares to recover ahead of hoped-for improvement later in the year. While the shares are attractive at 12 times earnings, the company's hotel and restaurant business puts it squarely in the firing line in an environment where consumer spending is unlikely to rebound even after lockdowns end, and those lockdowns themselves may be reimposed if infections start to rise again.

Ahead of the open, we expect the Dow to start at 24,445, down 130 points on Wednesday's close.

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