Markets Pare Early Losses, Trade Dominates Headlines
US: S&P 500 Index -0.8%, Dow -0.7%, Nasdaq -1.7%
Europe: STOXX Europe 600 +1.2%, German DAX +1.5% France CAC 40 +2.1%, U.K. FTSE 100 +2.1%
Asia: Japan Nikkei -0.5%, China Shanghai Composite -2.0%, Korea KOSPI -2.5%
Rates/Commodities: 10-Year Treasury yield -8 basis points to 2.39%, WTI crude oil +2.1%, COMEX gold: +0.0%
Markets closed slightly lower for the week, as the S&P 500 Index showed resilience in a three-day winning streak after one of the worst days of the year. On May 13, the S&P 500 fell 2.4%, its biggest one-day loss since January. The index then pared that loss through the end of the week.
Monday’s weakness was also reflected in the bond market. The spread between the 3-month and 10-year Treasury yields closed in negative territory, the second yield curve inversion (long-term rates falling below short-term rates) of the current economic expansion. Economic data continued to waver as this week’s retail sales data disappointed consensus estimates. Some investors have considered weakening consumer data a case for a Federal Reserve rate cut, but we continue to believe that a rate cut is unlikely given healthy wage growth and a labor market close to full employment.
“Trade tensions have weighed on consumer and business sentiment,” said LPL Research Chief Investment Strategist John Lynch. “However, we see plenty of evidence that solid U.S. fundamentals are intact, and we expect growth to stabilize and confidence to improve as trade talks near a resolution.” Trade continued to dominate international headlines, although news a bit more upbeat this week as the U.S. announced plans to lift steel and aluminum tariffs on Canada and Mexico, paving the way for Congress’ approval of the new North American trade deal. Elsewhere on the trade front, U.S. officials announced they would delay the decision to implement tariffs on auto-related imports from the European Union and Japan by 180 days. News of the delay buoyed European stocks, which managed to close the week firmly in positive territory.
Looking forward to the week ahead, investors will have their attention set on the Federal Open Market Committee meeting minutes on Wednesday. Overseas, a slew of Purchasing Managers’ Index data is slated for release, with Germany, Japan, and the composite Eurozone scheduled to announce. Track these and other important events on our Weekly Global Economic & Policy Calendar.
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FTSE 100 Index measures the 100 companies listed on the London Stock Exchange with the highest market capitalization.
The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Index trade volume on Q is scaled down by a factor of 1000.
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