Weekly Market Drivers | LPL Financial Research

Trade Continues to Simmer, Brexit Has a New Wrinkle

US: S&P 500 Index -1.2%, Dow -0.7%, Nasdaq -2.3%
Europe: STOXX Europe 600 -1.5%, German DAX -1.9% France CAC 40 -2.2%, U.K. FTSE 100 -1.6%
Asia: Japan Nikkei -0.6%, China Shanghai Composite -1.0%, Korea KOSPI -0.5%
Rates/Commodities: 10-Year Treasury yield -7 basis points to 2.32%, WTI crude oil -6.3%, COMEX gold: +0.7%

Markets continue to digest recent escalations in the trade negotiations between the U.S. and China, as the White House moved to blacklist Chinese telecommunications giant Huawei from conducting business in the U.S. The developments weighed on the technology sector, which outperformed only the energy sector amid a sharp drop in oil prices. While recent headlines have unsettled markets, the S&P 500 index remains less than 5% from its most recent all-time high. On the economic front, weak readings of U.S. manufacturing activity and durable goods orders are signaling that the U.S. economy is not immune to the trade dispute, despite solid economic growth. Turning to monetary policy, the Federal Open Market Committee minutes released on Wednesday showed most officials think a patient approach to future monetary policy is appropriate given muted inflationary pressure and moderate economic growth. “It’s tough to make a case for lower rates with over 3% gross domestic product growth, healthy wage growth, and a labor market close to full employment,” said LPL Research Chief Investment Strategist John Lynch. “If consumer inflation picks up, the U.S. economy will be near full employment with healthy inflation across the board, fulfilling the Fed’s dual mandate.”

While U.S.-China trade news has dominated the headlines, across the pond in Europe, Brexit negotiations have re-entered the spotlight as UK Prime Minister Teresa May announced her official resignation will be June 7 after failing to negotiate a satisfactory deal to both her party and the EU. Back in March, the deadline for completion of a deal for the UK’s departure from the European Union was postponed until October, and a party vote for a new Prime Minster could take time. Pro-Brexit MP Boris Johnson appears to be the early favorite.

The observance of Memorial Day shortens the week ahead, although key economic releases are on the docket, with core Personal Consumption Expenditures headlining the U.S. calendar. Overseas, consumer confidence indexes are slated for release in Japan and the composite Eurozone. Track these and other important events on our Weekly Global Economic & Policy Calendar.


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Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

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.

The Hang Seng index is a market capitalization weighted index which tracks daily changes of the 48 largest companies in the Hong Kong stock market.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of ten seasonally adjusted components based on questions on the following: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

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