Positive at a grassroots level

At the end of March, worries once again emerged with regards to the eurozone sovereign debt crisis, with concerns that Spain’s new government would not be able to reduce its budget deficit. This is in spite of the Spanish prime minister announcing €27bn (£22bn) of austerity in his recent budget.

The risk is of a deepening recession with a 1.7 per cent contraction in GDP already pencilled in for Spain this year. Spanish equities weakened following a disappointing bond auction where €2.6bn worth of Spanish government bonds were sold, below the target of €3.5bn, which almost inevitably pushed the yields on Spanish 10-year debt up to 6 per cent. Eurostat, the European Union’s statistics office, also reported that unemployment for Spain’s under-25s rose to 50.5 per cent in January. Spain’s overall unemployment is now 23.6 per cent, compared with a eurozone average of 10.8 per cent.

There has also been the uncertainty created by the imminent French presidential elections to contend with as opinion polls point, at the time of writing, to a change of president and a win by the socialist challenger François Hollande. Another left wing candidate, Jean-Luc Mélenchon, has also been attracting huge crowds.

Investors were anxious that US economic data might have stopped providing positive surprises. But this was mitigated by moderately better-than-expected US retail sales, which rose by 0.8 per cent in March, following February’s revised increase of 1 per cent, with many retail sectors progressing. As consumer spending represents about 70 per cent of the US economy as a whole, this reassured investors that some growth was still taking place in the economy.

Elsewhere, the oil price showed signs of drifting off its recent highs, which was a boost for the global economy. Shell’s share price had a wobble on a different issue, however, as it notified a potential spill in the Gulf of Mexico, two years after BP’s major disaster in the area. This was later declared to be a small “orphan” spill which should not have a long-term impact.

Energy

There is a major energy story underway in the US which is its re-industrialisation on the back of shale energy production, its specific boost to the US energy industry and its more general lowering of manufacturing costs for US companies overall. This is expected to lead to a renaissance, particularly in specific low-cost states, which look set to benefit from the return of manufacturing from China, in particular, where labour and land costs are rising strongly.

The UK budget, meanwhile, was seen a rather a non-event, in spite of being handled in a slightly inept fashion, leading to comment and dissatisfaction on certain specific measures, including tax proposals.

A more interesting development in the UK was that car sales rose by 1.8 per cent in March, which is significant as almost a fifth of annual new sales take place in March due to the introduction of new registration plates. The rise was driven by a 7.4 per cent increase in private car sales to consumers, which suggests that talk of the demise of the UK consumer may have been overdone.