It seems wherever you look at the moment, the economic data is coming in hotter than the market expects.

Take US producer prices for February, which last week rose by 0.6% on the previous month, or double the consensus forecast, due to a surge in energy prices which in turn drove a larger-than-estimated increase in the price of goods.

Economists were quick to ascribe the rise to difficulties in adjusting the data for year-end price increases and the S&P 500 index even made a new intraday high, its 17th this year.

Even recent Chinese data has surprised positively, something few traders would have bet on, with exports, factory orders and retail sales proving better than expected.

Chinese shares jumped in response as hopes rose the economy could be on track to meet the government’s ambitious 5% GDP growth target for the year.

Japan this week ended its eight-year experiment with negative interest rates after annual wage hikes by big firms stoked expectations inflation would hit the central bank’s 2% inflation target and stay there.

The nation’s biggest businesses agreed to increase wages by slightly more than 5% this year, the sharpest rise in 33 years, meaning there is no need for the Bank of Japan to wait till April to raise rates, which was the official plan.

While no-one is expecting the Bank of England or the Federal Reserve to raise rates this week, the tenor of the conversation has visibly changed from moving much closer to rate cuts to increased caution.

As MFS Investment Management chief economist and portfolio manager Erik Weisman observes, the market is ‘a hungry beast’ and investors ‘will want to get much more insight from chair Powell’s press conference as to whether the last two months of higher consumer inflation data risk undermining the overarching narrative of gradually weakening inflationary pressures’. 

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