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European services sector activity mixed. Following last week’s manufacturing data, which showed that activity in the region continued to deteriorate, this morning’s services sector readings were better, but problem areas remain. Broad activity in the composite Eurozone expanded more than consensus expectations last month, buoyed by Germany, though the region’s largest economy is still reeling from a slowdown in manufacturing. Weakness was particularly apparent in France, which is still dealing with the fallout from recent “yellow jacket” protests, and Italy, which entered recessionary territory in the latter half of last year and is now seeing both manufacturing and services activity in decline.
(Wage) inflation is a key indicator we’re watching. Moderating price inflation, which we expect to continue, supported the Federal Reserve’s (Fed) recent pivot to a more dovish stance on interest rates. On the other hand, wage inflation is an area we are watching more closely. Last Friday’s nonfarm payrolls data showed that hourly earnings rose 3.2% year over year in January, and it has been trending higher over the past year. However, our expectation is not for an unexpected spike that would force the Fed’s hand, and economic growth and the labor market remain robust but are not showing signs of overheating. In addition, as we discussed in last Friday on the LPL Research blog, history shows that average wage growth has topped 4% ahead of recessions.
Diversified investors’ big January. U.S. stocks and bonds’ strong rallies in January led to the best month for diversified investors since October 2011. The S&P 500 Index posted its biggest monthly gain since October 2015, and the Bloomberg Barclays Aggregate Bond Index (Agg) capped its second-best monthly performance in 2.5 years. On the LPL Research Blog today, we’ll highlight the diversified investor’s big month, and outline why fixed income could be an especially important portfolio component this year.
- Trade Balance (Dec)
- Markit US Services PMI (Jan)
- Markit US Composite PMI (Jan)
- ISM Non-Manufacturing Index (Jan)
- Markit Germany Services PMI (Jan)
- Markit Eurozone Services PMI (Jan)
- Markit/CIPS UK Services PMI (Jan)
- Eurozone Retail Sales (Dec)
- Nonfarm Productivity (Preliminary. QoQ, Q4 2018)
- Initial Jobless Claims (Feb. 2)
- Japan Leading Index (Preliminary, Dec)
- Japan Coincident Index (Preliminary, Dec)
- Bank of England Rate Decision
- Japan Current Account Balance (Dec)
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Index data obtained via FactSet
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