Market Update: Thurs, Oct 24, 2019 | LPL Financial Research

Daily Insights

Stocks cheer positive headlines. Stocks are higher this morning amid an optimistic turn in global headlines. The European Central Bank announced it would leave rates unchanged, and confirmed it would continue a new round of quantitative easing. Global stocks are also cheering reports that China is willing to purchase $20 billion in agricultural goods as part of the United States’ and China’s limited trade deal. The S&P 500 Index has mostly taken cues from trade and geopolitical developments lately, but it has struggled near record highs.

Mixed manufacturing data. Financial markets worldwide are largely shrugging off a mixed batch of October global manufacturing data. Markit’s manufacturing Purchasing Managers’ Index (PMI) for the Eurozone remained unchanged at 45.7 in October, a seven-year low and well into contractionary territory (below 50). Germany’s manufacturing PMI increased slightly to 41.9, but remained near a 10-year low. Global manufacturing has suffered from a steep decline in demand amid trade tensions. It may take a while for the sector to recover, even after signs of trade progress.

Durable goods drop. September’s durable goods data also hinted that domestic demand continues to slow. Durable goods orders slid 1.1% in September, lower than consensus forecasts for a 0.7% drop, according to preliminary data. Orders for nondefense capital goods (excluding aircraft), our best gauge of future capital expenditures, fell 0.7% last month, below estimates for a 0.2% decrease. More clarity on trade is likely required before we see a meaningful pickup in business capital investment.

Will dollar weakness continue? The U.S. dollar has fallen about 2% during October after rallying 12% during the prior 19 months. For currencies, that’s a big move in just a few weeks. This matters for several reasons, most notably the currency’s impact on trade — including the U.S.-China relationship — and on international investment returns. Today on the LPL Research blog, we’ll discuss where the dollar might go from here and some possible implications.

 

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