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  • ​Stock markets bounced back very strongly last week, with the US market leading the way (due largely to the performance of technology companies). In terms of macro data, inflation continued to take centre stage , with US inflation clocking in with its biggest monthly climb in over 10 years. This week is fairly quiet on the data front, with US markets closed today and Chinese markets closed through to Wednesday. Of interest for the UK market will be the results of the main UK banks that will give another data-point on the strength of the UK consumer.

    Last week

      - Stock markets bounced back strongly

      - US earnings season is on track for best growth since 2011

     - Bond markets stabilised

     - UK retail sales disappointed

     - US inflation had biggest monthly climb since 2005

     - US retail sales dropped the most in nearly a year

    This week

      - UK banks report results this week, with HSBC (Tuesday), Lloyds (Wednesday), Barclays (Thursday) and RBS (Friday)
     - It is pretty quiet on the economic data front this week, with the US market closed today and Chinese markets shut until Wednesday
     - UK labour market data on Wednesday will be keenly watched as it includes weekly earnings numbers that are impactful for inflation forecasts. We also have 4th quarter growth estimates for the UK on Thursday.

     - We have flash PMI (survey) data on Wednesday for Japan and the Euro area as well as Japan’s inflation data which will be out on Friday morning

    Last Week's Highlights

    ​ - Stock markets bounced back with a vengeance last week, with the US market chalking up its best weekly performance since 2013 - a sharp rebound from the prior week which was its worst week in two years. The US market was up 4.4% on the week which took it firmly back into positive territory for the year; up 2.5%. The UK market was up 3.1%, with materials driving gains, although the index still remains under-water (-4.6% year-to-date).

     - Standard Life Aberdeen (SLA), the UK’s largest listed asset manager, had a rough ride last week, with its shares falling 5.5%. This came following news that Lloyds Banking Group (their biggest client) would be taking £109bn away from them; this will knock almost a fifth off SLA’s total assets under management, as well as hitting profits by up to 10%.

     - Earnings season in the US is now 75% of the way through, with the blended growth rate for Q4 2017 coming in at 15.2% so far. If it stays at this level, it will mark the highest earnings growth rate since Q3 2011.

     - Bond markets were mixed last week, with UK gilts flat and treasuries down 0.3%. Credit performed slightly better, with high yield spreads contracting significantly from the sell-off; US high yield was up 0.8% last week but is still marginally down for the year. Investment grade markets were flat for the week and are still circa 2% down for the year given that they are much more sensitive to interest rate movements.

     - UK retail sales came out on Friday, which showed that British retailers had their worst start to the year since 2013, with annual growth in sales slowing to 1.6% in January compared with 2.3% in the same month last year. This growth rate was a long way below the 2.16% that analysts were predicting. Sports equipment saw stronger sales than usual, but food sales fell. The ONS said the longer-term picture showed "a continued slowdown" in the retail sector.

      - There was much focus on the US Consumer Price inflation number that came in at 2.1% on a headline level; 0.2% ahead of Bloomberg estimates but unchanged from the month before. This was the largest monthly climb since March 2005 and kept the year-on-year steady at +1.8% (+1.7% expected). The inflation number was buoyed by unusually large increases in clothing and medical care prices, with those for the former rising at their quickest pace since 1990.

     - Meanwhile, US retail sales posted their largest monthly decline since February 2017, with the number coming in at -0.3% for the month vs Bloomberg estimates of a 0.2% gain. Most of this decline was attributed to a slowdown in purchasing of things like cars and building materials, but even core retail sales were underwhelming with the numbers being unchanged last month after a downwardly revised 0.2% drop in December.

    Asset Returns

    Equities & Oil: returns are all in base currency, save for Global and Emerging which are in GBP. Bond returns are all shown in GBP. Gold in GBP. Source Bloomberg.

    UK retail sales had its worst start to the year since 2013

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