Week in review: In the UK, the Conservatives won a majority in UK elections, with 331 seats out of 650 seats in the house of Commons. The Labour party was wiped out in Scotland as the Scottish National party won 56 out of the 59 seats available. Markets in the UK reacted positively, with the FTSE 100 up 1.7 per cent in early afternoon trading led by energy and banking stocks — two sectors that could have suffered the most from higher taxes or higher regulatory burden expected by a Labour Government. The Conservative majority means that there is a case for pushing ahead with the European Union referendum, promised in the Tory manifesto to take place before the end of 2017. On the other hand, David Cameron’s strengthened position in the party may mean that he can ignore the more euroskeptic ranks, claiming the success of the Conservatives’ economic policy within the EU. The next few years will also be marked by the surge in the Scottish National Party, which is likely to mean more concessions from London as the Government tries to avoid the case for another referendum on Scotland staying in the UK.
Elsewhere in Europe, signs of a recovery continued as the employment rate of the population aged 20 to 64 in the European Union (EU) increased in 2014, reaching 69.2%, the first annual rise since the beginning of the crisis but still far from its 2008 peak (70.3%). ECB data also showed that the annual growth rate of total credit granted to euro area residents increased to 0.4% in March 2015, from 0.0% in the previous month, while the annual growth rate of credit extended to the private sector was less negative at -0.2% in March, from -0.5% in the previous month. European Commission forecasts were upgraded, as the EC considers that Europe’s economies are benefiting from many supporting factors such as low oil prices, steady global growth, euro weakness, and supportive EU policies. In the case of Portugal, EU Commission growth forecasts are not significantly different from the Government’s. Turning to public finances, the Commission expects the measures in the 2015 Budget to have a less significant impact on the deficit than the Government anticipates.
Int he US payrolls were up 223 thousand, better than expected pointing to a strong recovery after the weakness in Q1 GDP. If employment surges ahead of expectations again there may be a case for a first hike in June, though markets favour a later date for now.
Week ahead: Q1 GDP numbers for many European countries will be released on Wednesday. In Portugal, expectations are for a 0.5%qoq rise after 0.5%qoq in Q4. High frequency indicators suggest growth may surprise on the upside. in the euro area, growth is seen rising to 0.5%qoq after 0.3%qoq in Q4.