Weekly Update 9/7/2018 – Lingering Uncertainty Weighs on Markets

US: S&P 500 Index -1.0%, Dow -0.2%, Nasdaq -1.66%
Europe: STOXX Europe 600 -2.22%, German DAX -3.3% France CAC 40 -2.9%, U.K. FTSE 100 -2.1%
Asia: Japan Nikkei -2.4%, China Shanghai Composite -0.8%, Korea KOSPI  -1.8%
Rates/Commodities: 10-Year Treasury yield +12 basis points to 2.94%, WTI crude oil -2.8%, COMEX gold -0.4%

Investors were in a decidedly downbeat mood this week. Positive U.S. economic data did little to lure domestic buyers as traders’ focus on a lack of progress in trade negotiations led global equities to post their worst week since March.

Better-than-expected manufacturing and services data failed to attract buyers, as did the monthly nonfarm payrolls report that indicated the labor market remains solid. Instead, persistent selling pressure in the technology sector helped to anchor indexes in the red. Technology stocks’ woes came on the heels of Congressional testimony from executives of Facebook and Twitter, as well as angst around the potential outsized impact to companies in the sector should President Trump move forward with another round of tariffs on Chinese goods that could amount to as much as $267 billion, which would be in addition to the $200 billion already in place.

Overseas, selling pressure was widespread with regional indexes in Europe and Asia shedding more than 2% and 3%, respectively. Traders had little in the way of positive catalysts— a lack of progress in trade negotiations between the U.S. and China, Europe or Canada remained a key headwind, recent weakness in emerging market currencies bled into stocks, and economic data was mixed-to-lower. However, according to LPL Chief Investment Strategist John Lynch, “Despite slowing a bit from its second-quarter pace, manufacturing data released this week suggest annualized growth in global gross domestic product could modestly exceed our expectations for 3.8% this year.”

Next week will see a slew of data releases in the U.S. that will help investors gauge small business optimism and consumer sentiment, along with monthly figures for producer and consumer prices, retail sales, and industrial production. Highlights abroad include the European Central Bank’s monetary policy meeting and inflation data out of China and Japan. Also, expect Turkey to remain in focus with data releases on its Q2 gross domestic product and current account balance straddling its central bank’s monetary policy meeting on Thursday. Track these and other important events on our Weekly Global Economic & Policy Calendar.


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