Weekly Market Drivers | LPL Financial Research

Global Growth Anxiety Overshadows Trade Progress

US: S&P 500 Index -1.3%, Dow -1.2%, Nasdaq -0.8%
Europe: STOXX Europe 600 +0.5%, German DAX +0.7% France CAC 40 +0.8%, U.K. FTSE 100 +1.5%
Asia: Japan Nikkei -1.4%, China Shanghai Composite -0.5%, Korea KOSPI  -0.3%
Rates/Commodities: 10-Year Treasury yield +2 basis points to 2.89%, WTI crude oil -0.2%, COMEX gold: -0.5%

Stocks appeared headed for weekly gains after some headway was made in U.S.-China trade negotiations, but a Friday selloff erased the advances. The trade progress, which included a resumption of Chinese soybean purchases, a decrease in import tariffs on U.S.-made automobiles, and an agreement that China would replace its “Made in China 2025” campaign were welcomed by investors who were left mostly in the dark last week following President Trump’s G-20 summit meeting with his Chinese counterpart Xi Jinping. Stocks in the technology and communication services sectors held up best, underpinned by semiconductors and software firms that found buyers amid an easing of trade tensions, though broad weakness elsewhere kept major indexes in the red.

Overseas, the U.K.’s divorce proceedings from the European Union (EU) returned to the spotlight after U.K Prime Minister Theresa May faced a “no confidence” vote in Parliament following her failure to secure the necessary votes to win approval for the deal she negotiated with EU officials. She survived the vote, though by a narrow enough margin that her ability to push her Brexit plan through remains very much in doubt. Adding to investor angst in the region was a series of disappointing services and manufacturing data released throughout Europe—just a day after the European Central Bank announced that it remains committed to ending its asset purchase program at the end of the month—as did lackluster retail sales and industrial production reports out of China. On the increase in global growth concerns, LPL Chief Investment Strategist John Lynch said, “Overall, the data continue to support our preference for U.S. equities over foreign. However, emerging markets remain attractive despite the lackluster Chinese data as government officials will use all the tools at their disposal to support economic growth, and our expectations for a meaningful trade deal with the U.S. within the next few months support our positive bias as well.”

Looking ahead, a slew of data is due out in the U.S., though the highlight of the week will be the Federal Reserve’s monetary policy meeting on Tuesday and Wednesday. A rate hike is expected, so market participants will instead be looking for any indication of the future path of the policy rate for 2019. In Europe, economic data is headlined by third-quarter GDP, along with producer price data, from France and the UK. In Asia, all is quiet out of China, though core inflation data from Japan will garner attention. Track these and other important events on our Weekly Global Economic & Policy Calendar.

 

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