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. 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted

Investing in foreign and emerging markets securities involves special additional risks. These risk include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured.  These products are not Bank/Credit Union obligations and are not endorsed, recommended or guaranteed by any Bank/Credit Union or any government agency.  The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

Member FINRA/SIPC

For Client Use – Tracking #1-825627 (Exp. 2/20)