Your Weekly Update – World Economic Forum, Global Trade in Spotlight

Weekly Performance

US: S&P 500 Index +2.23%, Dow +2.09%, Nasdaq +2.31%
Europe: STOXX Europe 600 -0.57%, German DAX -1.01%, France CAC 40 +0.05%, U.K. FTSE 100 -.84%
Asia: Japan Nikkei -0.74%, China Shanghai Composite +2.01%, Korea KOSPI  +2.16%
10-Year Treasury yield: +0  basis points to 2.66%, WTI crude oil +4.45%, COMEX gold +1.15%

It was another good week for U.S. equities as major indexes logged their fourth straight weekly advance. The week was highlighted by the World Economic Forum (WEF) in Davos, Switzerland, which brought CEOs, policymakers, and world leaders together; including President Trump, German Chancellor Angela Markel, and French President Macron. Amid overwhelming optimism at the WEF, the U.S. dollar, whose value impacts everything from commodities such as oil and gold to interest rates, endured a volatile week after comments from Treasury Secretary Steve Mnuchin, speaking at the conference, said he favored a weaker dollar (since it benefits U.S. trade by making domestic goods cheaper for overseas consumers). Following the news the greenback was sent tumbling to multi-year lows before stabilizing after President Trump suggested the Treasury Secretary’s comments were taken out of context, and indicated that “the dollar is going to get stronger and stronger…” over time under his leadership, and that he “…ultimately wants to see a stronger dollar.”

Overseas markets followed a similar path, though Europe lagged its counterparts in the U.S. and Asia with the STOXX Europe 600 finishing lower on the week after regional manufacturing data came in below expectations and as traders digested the outcome of the European Central Bank’s policy meeting, as well as the minutes from its December meeting. Turning to Asia, global trade was in focus with stocks in China and South Korea powering ahead despite fresh tariffs on washing machines and solar panels, which are imported primarily from the two countries. Elsewhere, news came out that the Trans-Pacific Partnership, which includes 11 nations, is likely to be signed in March despite the U.S. pulling out of the deal; and Washington officials are meeting with representatives from Canada and Mexico to negotiate new terms of North American Free Trade Agreement (NAFTA).

Next week will be busy in the U.S. and abroad. In the U.S., the Federal Reserve (Fed) policy meeting highlights the week. No rate hike is expected, but investors will be focused on the Fed’s language to determine if rate hike path continuity will be maintained during Jerome Powell’s transition to be the new Fed Chair. On the data front, look for inflation readings and the Dallas Fed Manufacturing Index on Monday; consumer confidence on Tuesday; ADP’s employment report, Chicago PMI, pending home sales, and Employment Cost Index on Wednesday; ISM and Markit manufacturing on Thursday;  and the closely watched nonfarm payrolls report to cap off the week. Reports to monitor in Europe include Tuesday’s GDP data for the Eurozone, France and Germany; while key data later in the week include regional inflation and manufacturing PMI, and Eurozone unemployment. China and Japan highlight the docket in Asia, with Japanese retail sales and industrial production along with PMI figures for both countries.

 

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