Market update: Is bad news good news? Weak data may extend easy policy 25.04.2013

Source: Henderson Global Investors

Both the S&P 500 and the Nasdaq indices ended flat yesterday as the tug of war continued between the forces of growth and central bank stimulus. Bad news was seen as good news when Germany's Ifo survey of business sentiment came in significantly below analysts’ expectations – investors saw it as increasing the chance that the European Central Bank would shave interest rates by a quarter point at its policy meeting next week. Additionally, in the US, durable goods orders fell the most in seven months in March – taken together with the recent softer data on payrolls, retail sales and business confidence, markets are thinking the US Federal Reserve is less likely to taper its asset purchase programme early.

European markets are in negative territory this morning (FTSE Eurofirst 300 -0.3%; FTSE 100 -0.2%) following disappointing earnings reports from Spanish bank Santander and consumer products group Unilever. Car insurer Admiral also moved lower after announcing a fall in turnover during the first quarter, given difficult economic conditions in the UK. On that theme, the release of UK gross domestic product growth data this morning showed that output rose 0.3% in the first quarter of 2013 (initial estimate), putting paid to fears that the UK would slide into a ‘triple-dip recession.’