Your Weekly Update – Stocks Tumble Amid Spike in Interest Rates, Waning Sentiment

Weekly Performance

US: S&P 500 Index -3.85%, Dow -4.12%, Nasdaq -3.53%
Europe: STOXX Europe 600 -3.12%, German DAX -1.01%, France CAC 40 -2.97%, U.K. FTSE 100 -2.90%
Asia: Japan Nikkei -1.51%, China Shanghai Composite -2.70%, Korea KOSPI  -1.92%
10-Year Treasury yield: +17  basis points to 2.85%, WTI crude oil -1.54%, COMEX gold -1.65%

Global equities tumbled this week as major U.S. indexes shed more than 3%. Monday’s session began on a somewhat downbeat note after the first reading of fourth quarter gross domestic product growth, though healthy at 2.6%, failed to meet expectations.  Upbeat earnings and a series of positive economic data that included an uptick in consumer confidence, pending home sales, and construction spending were also overshadowed by waning sentiment and steadily rising interest rates that left the yield on the 10-year Treasury note above 2.8%; a level not seen since 2014.

In Europe, the reading on fourth quarter Eurozone GDP data, though coming in at its best level in 10 years, actually heightened speculation that the European Central Bank (ECB) could begin removing monetary stimulus sooner than previously anticipated; an argument that was already being made after news releases following last week’s ECB meeting suggested there is discord among members about the timing and swiftness with which to end its quantitative easing program.

Meanwhile, China primarily drove regional market direction with the country’s former finance minister warning that the country faces significant risk of a systemic financial crisis because of the financial industry’s complex structure and irregularities; the comments preceded weaker-than-expected manufacturing data, which some viewed as further evidence of a slowdown in the country’s growth.

Next week, a full slate of Markit Services PMI data is due out on Monday, including readings from: the U.S., Eurozone, Italy, France, Germany, China, and Japan. U.S. trade balance figures, Jolts job openings, consumer credit, and wholesale inventories are releasing over the balance of the week along with a slew of Federal Reserve member appearances. Several ECB members are scheduled to make appearances with the central bank’s Economic Bulletin publishing on Thursday; and a series of industrial production data is also due out Friday for the Eurozone, Italy, France, and Germany. In Asia, Japan posts its Leading Index and money supply, while foreign reserves, import/export, inflation, and trade balance are due out in China.

 

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