Weekly Market Drivers | LPL Financial Research

Global growth concerns outweigh positive trade developments, sending stocks deep into the red

US: S&P 500 Index -2.2%, Dow -2.2%, Nasdaq -2.5%
Europe: STOXX Europe 600 -1.0%, German DAX -1.2% France CAC 40 -0.7%, U.K. FTSE 100 0.0%
Asia: Japan Nikkei -2.7%, China Shanghai Composite -0.8%, Korea KOSPI -2.6%
Rates/Commodities: 10-Year Treasury yield -13 basis points to 2.63%, WTI crude oil +1.5%, COMEX gold: 0.1%

Investors largely ignored further progress in U.S.-China trade negotiations this week, instead focusing on economic data and cuts to gross domestic product growth forecasts from the European Central Bank and the OECD, which provided reason enough to lock in gains following the equity markets’ rally since the beginning of the year.

U.S. and Chinese officials touted advancements in negotiations that they expect to lead to a final deal later this month, just as trade data from China showed exports to the U.S. plummeted 28% in February, while U.S. data showed its goods deficit hit a record $821 billion in 2018. “While the gap between U.S. imports and exports hit a record last year, the data reflect relatively strong economic growth at home amid a robust labor market with healthy wage growth, all of which boosted consumer and business demand for imported goods,” said LPL Chief Investment Strategist John Lynch.

Abroad, a surprise move by the European Central Bank on Thursday to keep rates at current levels until at least 2020 and implement a fresh round of monetary stimulus in the face of slowing economic growth weighed on investor sentiment globally. Renewed global growth fears exacerbated selling pressure in the U.S. and pushed European stocks, which had been trending sideways, into negative territory. Meanwhile, China’s Shanghai Composite fell sharply in Friday’s session (-4.4%), erasing five days of gains and snapping an eight-week win streak on the heels of the trade data, as well as a downgrade in the stock of a prominent insurance company from China’s largest brokerage firm, which sparked speculation that the government is attempting to reign in the equity markets’ spectacular rise since the beginning of the year.

Next week, consumer and business sentiment reports are due out in the U.S., along with inflation data. Overseas, industrial production figures out of China, Germany, and the composite Eurozone are noteworthy. Track these and other important events on our Weekly Global Economic & Policy Calendar.

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