Global markets were dealt a blow last week as the US reported a weak non-farm payroll figure for February. The headline figure fell from an upwardly revised 311,000 in January to only 20,000 in February, significantly undershooting market expectations of 180,000. While it is not uncommon to have volatile monthly data, the low reading will increase concerns of a US slowdown or even a recession. The return of Federal workers following the government shutdown has made the February data potentially unreflective of the underlying economy and economists will be keen to see data over the next couple of months to confirm a change in the trend. Nevertheless, for the time being, it is encouraging that the unemployment rate remains at historically low levels with the participation rate and wages continuing to rise.
Greek Government Bond Issue
Greece is returning to the debt markets following years of absence. The country has finally turned around its economy after many years of punishing bailouts and is now expected to run fiscal surpluses to pay down the mountainous debt pile. Issuing bonds on the public markets will test investor appetite; however, the rally in the government’s debt and the low yields available in the Eurozone would suggest that they will have no problem filling their requirements. Still, the debt-to-GDP ratio of Greece is one of the highest in the world, and it will take several decades of reforms and austerity to return the country to a comfortable level of debt.
UK Promised Government Spending Boost
Under the spectre of the Parliament Brexit votes this week (which may or may not happen) the Chancellor, Philip Hammond, has promised a boost to government spending if the Prime Minister’s deal is passed. The so-called Brexit dividend would be directed to struggling public services and less prosperous areas of the country. However, with emergency funding also set aside for a no-deal Brexit, it appears that increased Government spending is on the cards regardless of the outcome. The recently released public finance figures show that there is scope for spending to be increased and with the Spring Statement scheduled this week, the Chancellor is due to reveal what his intentions are. While a fiscal boost should provide a stimulus at a time when support from the global economy is waning, any resolution to the political uncertainty is likely to provide the biggest improvement to sentiment.
|UK 10 Year Gilt Yield||1.29||1.19||-0.1||-7.75%|