The Tuesday note - 3 April 2018

• The FTSE 100 rallied by nearly 135 points last week to close on Thursday at 7,056.6, although yesterday saw a marked decline for shares in the US on fears of a trade war with China. 
• The FTSE Emerging Index will include Saudi Arabia from March next year. Many global equity funds are benchmarked against the index, so the move should lead to an inflow of money into Saudi company shares. 
• The unemployment rate in Germany fell to 5.3% in March, which is its lowest level since the country re-unified in 1990. The news will raise fresh concerns over labour shortages. 
• The UK index of services increased by 0.6% in the three months to January 2018, up from 0.4% in December 2017 and the strongest rate of growth since December 2016. 

Chief Economist comments: 

The economic indicators are showing healthy readings, but the financial markets are volatile. Why is there a disconnect? Financial markets look past the current crop of statistics, and reflect where investors believe the economy is going.

Investors are dividing into those who feel this is late cycle, and those who believe we have further to go. Nevertheless, volatility around a bank holiday weekend needs to be taken with a pinch of salt, as a lot of decision makers are away from their desks. If the volatility persists further into April there will be more reason for concern.