By Chris Dorrell
Investors will get another health check on the state of the global economy when a clutch of influential business surveys are released on Thursday.
S&P’s May purchasing managers’ index (PMI) will be released for the UK, the US and the eurozone, with investors expecting the surveys to point in different directions.
PMIs capture economic activity in the private sector and are widely seen as good forward indicators for an economy’s performance. Analysts at Deutsche Bank said the surveys would provide “a temperature check on growth across the key economies as perceived inflation risks subside”.
Last month’s PMI showed the economy expanding at a much faster pace than economists expected, largely driven by the UK’s dominant services sector.
Economists expect a slight moderation in May, but the economy will remain comfortably in expansionary territory.
The eurozone meanwhile has struggled to generate any real momentum this year, however traders expect a slight pick up in activity this month. This is unlikely to deter the European Central Bank (ECB) from cutting interest rates in June.
“We believe that there was a further improvement in activity levels, once again driven by the service sector, with the underlying trends remaining positive,” economists at Investec said.
Investors will receive a number of other figures on the UK economy, with inflation figures due out on Wednesday and retail sales on Friday alongside a consumer confidence report.
Economists at Investec expect the gradual bounce back in consumer confidence to continue while retail sales volumes will also show some growth.
The improving picture on the consumer side reflects the continued drop in inflation even as wage growth remains relatively high.
A number of Bank of England rate-setters will also be speaking during the week. Ben Broadbent and Andrew Bailey, both of whom voted to leave interest rates on hold earlier this month, will deliver speeches explaining their thinking on monetary policy.
Traders expect the Bank of England to start cutting rates this summer but its unclear whether the Bank will be in a position to cut interest rates next month.
On the corporate side, Nvidia’s results for the first quarter are due out on Wednesday. Nvidia is the single-best performing stock in the S&P 500 over the past year.
“The market is clearly geared up for another upside surprise relative to the guidance provided by chief executive Jensen Huang alongside the fourth quarter results in January,” analysts at AJ Bell said.
