Selling all-round last week. In the final count, US equities held up reasonably – with the S&P 500 losing just 1.6%, and the Vix cooling moderately to 24.6%. Emerging markets and the euro both suffered more. The MSCI EM index lost 3.14%, weighed by particular weakness in China, where efforts to cool expansion continued. The euro lost 1.7% against the dollar, as worries around Greece remained centre stage.
More worrying than price movements though, the sentiment was also weak: US equities falling on the day that we learn GDP rose by 5.7%? A clear reflection of the change of mood since President Obama announced plans to tackle conflicts of interest in the financial sector. This is not to say that the market is about to fall off a cliff, stimulatory policies remain supportive, but it seems unlikely that there will be large-scale buying in the near-term. With that in mind, we continue to watch the moving averages as potential support lines – even the 200 day moving average is just 5.7% away.

Looking ahead then, the picture is rather murky. Sentiment is weak but funding conditions are supportive, and this week there is plenty of data due, which should provide further guidance:

Monday
US – Personal Income & Spending (Dec), ISM Manufacturing (Jan), Construction Spending (Dec). Manufacturing and construction may have eased, but spending should have continued to grow.

Tuesday
Europe – PPI (Dec). Possibly edging back toward flat YoY.
US – Motor Vehicle Sales (Jan). Expected down MoM.

Wednesday
Europe – Retail Sales (Dec). Watch this volatile number for guidance about European economic sentiment, although strong consumer expansion seems unlikely.
US – ISM Non Manufacturing (Jan). Expected up moderately on December.

Thursday
US – Factory Orders (Dec). Continuing to increase, albeit slowly.

Friday
US – Non-Farm Payrolls (Jan), Unemployment (Jan). Consensus is for flat payrolls, and for unemployment to have inched higher. With consensus at zero, surprise here will move markets.