Shares rebound but economic outlook remains lacklustre

shares

It’s quite understandable if investors are confused at the moment as news flow and data releases are not providing certainty.

Disappointing Apple revenues were rapidly followed up by a drop in the US manufacturing ISM index not seen since 2008, which caused a big sell-off in US equities last week. Better news on the possible US government shutdown and trade talks with China subsequently provided support in Asia and Europe, but a flurry of PMI data in Europe has, for the most part, been a little disappointing, although the UK was quite good.

The weak December PMI adds to the evidence that the services sector has had a very challenging fourth quarter. The weak set of December PMIs reinforce the belief that the Bank of England will remain firmly in ‘wait and see’ mode on monetary policy until after the UK leaves the EU in March 2019. Moderating inflation amid weakened oil prices gives the Bank of England increased scope to adopt a cautionary approach on interest rates.