Weekly Market Drivers | LPL Financial Research
Trade Progress Buoys Markets Amid Lackluster Economic Data
US: S&P 500 Index +0.6%, Dow +0.6%, Nasdaq +0.7%
Europe: STOXX Europe 600 +0.6%, German DAX +1.4% France CAC 40 +1.2%, U.K. FTSE 100 -1.0%
Asia: Japan Nikkei +2.5%, China Shanghai Composite +4.5%, Korea KOSPI +1.6%
Rates/Commodities: 10-Year Treasury yield -1 basis points to 2.65%, WTI crude oil +2.6%, COMEX gold: +0.1%
Meaningful progress in U.S.-China trade negotiations kept stocks out of the red this week despite a series of disappointing, key economic data.
Major U.S. indexes gyrated this week, though an undercurrent of optimism around high-level U.S.-China trade negotiations outweighed reports showing weaker-than-expected manufacturing activity and mixed housing data. Also helping were the minutes from last month’s Federal Reserve meeting (released on Wednesday), which showed near-unanimous support for halting the wind-down of its roughly $4.5 trillion balance sheet. The benchmark S&P 500 Index was near-flat heading into Friday’s session, though it finished out the week higher thanks to reports that President Trump was meeting with Chinese Vice Premier Lu Hi, which suggested to investors that significant progress was being made.
Elsewhere, WTI crude oil snapped a six-day winning streak on Thursday but posted another weekly advance, while gold fell despite U.S. dollar weakness. Treasury yields were lower, though the yield curve, as measured by the difference between two- and 10-year yields, steepened. “We’ve seen downward pressure on Treasury yields recently amid uncertainty surrounding a number of global issues,” said LPL Chief Investment Strategist John Lynch. “Still, we expect accelerating inflation and still solid domestic growth prospects to push the yield on 10-year notes up to 3% or more over the balance of the year.”
Abroad, reports that showed manufacturing activity in the 19-member Eurozone contracted in February for the first time in five years, and a German business survey showed company executives in the region’s largest economy expect growth will continue to lose momentum, provided further evidence of a continued deceleration Europe’s economy. Still, stocks rode the trade optimism tailwind to finish the week in positive territory. The U.K. was a notable exception, however, as the FTSE 100 fell nearly 1% after another round of Brexit talks without progress lead to expectations Prime Minister Theresa May could be forced to request a three-month extension. Stocks in Asia were the biggest beneficiaries of trade progress, led by China’s Shanghai Composite, which surged 4.5%.
Looking to the week ahead, the first preliminary fourth quarter gross domestic product announcement headlines the U.S. economic docket. In Europe, a host of consumer price inflation (CPI) data will be released with France, Germany, and the composite Eurozone reporting. In Asia, Japan will report CPI figures as well, along with unemployment rate. Track these and other important events on our Weekly Global Economic & Policy Calendar.
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