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This latest leg of the equity rally is being subjected to ‘death by a thousand cuts’, driven primarily by a lack of good news – what little economic data there has been has tended to the downside, giving a further excuse to sell risk assets.
Airlines dropped after Air France-KLM became the most recent flag carrier to warn on profits, and with travellers around the world contemplating the prospect of having their phones et al confiscated at security, there are plenty of reasons to be gloomy about the trading outlook for airlines.
Meanwhile, Marks & Spencer’s latest update contains fresh reasons (or ‘excuses’ for the less charitable) for poor performance, but the shareholders will be right to ask why the company felt that it was the right time to overhaul its website, when sales continue to slide. As with a lot of household names, it all seems a bit ‘too much, too soon’ for M&S.
Sterling was on the back foot for a change after terrible UK figures; a turnaround in UK figures will make Bank of England meetings even more mundane, banishing the hawks and talk of an early rate hike.
Just as no dip in US indices is too small to be bought, no top on Wall Street at present is too small to be used as the start of the long-awaited ‘major correction’. So long as everyone keeps looking for it, it is unlikely to materialise.
Earnings season kicks off today, with Alcoa taking its usual over-hyped spot, but the focus will be on whether US companies can manage a bounce back from the first quarter, mirroring the shift in economic news.
Ahead of the open, we expect the Dow Jones to start 28 points lower at 16,996.