Market Update: Thursday, June 7, 2018

MacroView_header

Daily Insights

  • ECB economist’s comments push yields higher globally. The European Central Bank’s (ECB) chief economist Peter Praet stated yesterday that the decision on when to end asset purchases could be made, and potentially announced, at the ECB’s meeting on June 14, 2018. This was earlier than the market expected and sent yields higher in Europe, as well as the U.S. ECB bond purchases are slated to run at 30 billion euros ($35 billion) a month until at least September, and markets expected asset purchases to potentially begin to wind down in December 2018. Ultimately, the decision will likely hinge on inflation data, and whether the ECB believes that inflation is on pace to converge to its target. The news hit Italian government bonds particularly hard, exacerbating their recent weakness due to political woes faced by the country with its new anti-establishment leadership. Italian 1-, 2-, 3-, 4- and 5-year bond yields all rose by over 30 (0.3%) basis points during the trading day.

  • Global PMI data reflects broad global strength with U.S. taking the lead. Measures of U.S. manufacturing activity have broken away from the global pack to the upside while the European manufacturing sector has slowed over the past couple of months. Still, recent Markit Purchasing Managers’ Index (PMI) data indicates a solid 80% of countries are in expansion. Despite the soft patch in Europe, a global average of 53.1 in May is solidly expansionary and only 1.4 points behind the recent peak in December 2017.

  • Headlines suggest trade tensions may be rising ahead of this weekend’s G-7 summit. Key points of potential negotiation beyond tariffs and import quotas include environmental issues, Iran, and North Korea. Until we see evidence that trade could be materially disrupted, we remain comfortable with taking benchmark-level risk in portfolios.

  • Trade deficit narrowed in April. The trade deficit narrowed by $1.0 billion in April, its second straight decline, to $46.2 billion, marking the smallest deficit since September 2017. Consensus was for a smaller $0.3 billion reduction, while the previous month’s deficit was revised down by $1.8 billion to $47.2 billion. The reduction in April was driven by a smaller goods trade deficit, while the services surplus was little changed. However, on a 12-month total basis, the trade deficit widened marginally to $573.1 billion, the biggest gap in nine years, with deficits with China and Europe hitting records. April trade data represents progress and will marginally boost gross domestic product, but balancing trade clearly represents a significant challenge for the Trump administration.

  • Jobless claims lower than expected. New applications for unemployment benefits were reported this morning coming in at 222,000 vs. expectations of 225,000. The number represents a four-week low, though the less volatile four-week moving average of claims moved slightly higher to 225,500. The data continue to support our view of a strong and gradually tightening labor market.

MonitoringWeek_header

Click Here for our detailed Weekly Economic Calendar

Thursday

  • Eurozone: GDP (Q1)
  • Japan: Current Account Balance (Apr)
  • Japan: GDP (Q1)
  • China: Trade Balance (Mar)
  • China: Imports & Exports (Mar)

Friday

  • Wholesale Inventories (Apr)
  • Germany: Industrial Production (Apr)
  • France: Industrial Production (Apr)

 

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.

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.

All performance referenced is historical and is no guarantee of future results.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

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.

Member FINRA/SIPC

For Public Use – Tracking # 1-736956 (Exp. 6/19)