Global equities moved higher amid political chatter and central bank announcements. As expected, the Fed raised its benchmark fed-funds target rate 25 basis points, noting the US economy’s continued strength. US political gridlock over the American Health Care Act deepened following the Congressional Budget Office’s assessment. February’s retail sales and consumer prices met expectations at 0.1% m/m and 2.7% y/y respectively, while manufacturing production beat expectations at 0.5% m/m.
In the Netherlands, incumbent Prime Minister Mark Rutte’s party won a plurality of votes, while populist Geert Wilders’ party claimed fewer parliamentary seats than expected.
Eurozone February consumer prices grew 2.0% y/y, while January industrial production was lighter than expected, rising 0.6% y/y. The UK economy added 90,000 jobs in January, and its unemployment rate decreased to 4.7%. The Bank of England left interest rates unchanged. Economic data in Asia were mixed. the Bank of Japan left monetary policy unchanged.
Japan’s January industrial production figures were slightly better than expectations, but declined -0.4% m/m.
Next week the US releases February durable goods and existing home sales data, and the UK releases retail sales, consumer and home prices.
Global equities fell modestly amid generally positive economic data and persistent political chatter. US economic data were largely positive. Trade picked up in January as exports and imports climbed, while February nonfarm payrolls handily beat expectations. House Republicans unveiled legislation to replace the Affordable Care Act, but it remains too early to project potential market impact as the bill may be significantly altered or supplanted during the legislative process. European economic data were mixed but continue to show positive momentum.
The third and final estimate of Q4 2016 eurozone GDP confirmed 1.7% y/y growth—the 15th consecutive quarter of expansion.
In Asia, China’s annual National People’s Congress confirmed expectations for most 2017 economic targets—specifically, 6.5% GDP growth. South Korea’s Constitutional Court permanently removed Park Geun-hye as president amid corruption charges. By law, the country must now elect a new president within 60 days.
In the week ahead, the US releases employment data, the Fed and Bank of England meet to determine their countries’ respective monetary policies, and the Netherlands holds Parliamentary elections. As the election passes, expect falling uncertainty to broadly benefit global stocks regardless of the outcome.
Global equities ended the week higher amid widespread positive economic data. US markets digested abundant central bank chatter and President Trump’s first address to Congress. Beyond all the talk, economic data were largely positive, reflecting a broadly healthy economy. The second revision of Q4 2016 GDP was unchanged—the US economy grew at 1.9% (annualized), as high consumer spending and vehicle sales offset slowing government purchases. French, German and eurozone PMIs remained expansionary in February.
UK data were mixed but remained broadly positive—February home prices rose 4.5% y/y, construction PMI rose ahead of expectations, the UK’s services and manufacturing PMIs slowed, but continued to signal growth.
February Chinese manufacturing expanded on strong domestic and overseas orders, surprising forecasters’ expectations for a slowdown. Japan’s January manufacturing PMI continued expanding, housing starts rose 12.8% y/y (sharply ahead of the 3.2% forecast), retail sales were modestly ahead of estimates and unemployment fell to 3%.
In the week ahead,US economic data are light, January factory orders and February employment reports likely take center stage. China releases February inflation and trade data, while Japan reports Q4 GDP and February machinery orders.The eurozone posts Q4 GDP and the ECB releases a monetary policy announcement.
Stocks ended slightly higher despite sparse economic news. In the US, earnings season continued—two-thirds of companies beat earnings targets so far and over half beat revenue estimates. The Fed released minutes from its latest meeting—expectations for gradual rate increases remain intact.
United Kingdom Q4 2016 GDP was revised higher in its second release. The stronger posting was tied to better than expected consumption.
January Japanese trade data disappointed, with export volumes falling 0.3% y/y.
January Chinese loan data continued slowing.
Mexico’s Q4 2016 GDP grew 2.4% y/y, thanks to strong services output.
In the week ahead, the US releases January durable goods orders data. President Trump will address Congress for the first time. The UK releases January home prices. Japan reports January retail sales and industrial production.
Global stocks ended the week higher amid plentiful economic data. US economic data were largely positive— the Leading Economic Index (LEI) grew 0.6% m/m, headline Consumer Price Index (CPI) grew 2.5% y/y and core CPI grew 2.3% y/y. January retail sales beat expectations, suggesting strong consumer demand.
UK unemployment rate held at 4.8%, while jobless claims dropped despite expectations for a slight uptick. Both headline and core CPI grew while retail sales dropped slightly, missing expectations.
Eurozone Q4 2016 GDP was revised down from 0.5% q/q to 0.4%, still marking the eurozone’s fifteenth consecutive quarter of growth.
In Asia, Chinese CPI accelerated to 2.5% y/y, ahead of estimates and hitting a new multi-year high. Japanese Q4 2016 GDP grew an annualized 1.0% q/q, narrowly missing expectations but marking the country’s fourth consecutive quarter of growth.
Global stocks ended the week higher amid plentiful economic data. US economic data were mixed and political noise dominated headlines. January import prices rose a sharp 3.7% y/y, largely driven by volatile oil prices.
In the UK, Brexit uncertainty continued to abate after Parliament voted to give Prime Minister Theresa May the power to invoke Article 50 and begin exit negotiations with the European Union. UK economic data were broadly positive. December industrial production accelerated 4.3% y/y, well ahead of the 3.2% forecast.
In the eurozone, economic data were light. The eurozone retail Purchasing Manager’s Index (PMI) dropped modestly—from 50.4 in December to 50.1 in January.
In Asia, Chinese trade data reflect a robust economy—January imports climbed to 16.7% y/y and exports rose 7.9% y/y, beating expectations. Japanese data were broadly positive. December bank lending rose 2.5% and core machinery orders rose 6.7% y/y, well ahead of the 4.6% y/y forecast.
Global equities were relatively flat as investors sorted through a flurry of political headlines, economic data and corporate earnings reports. Markets faced no shortage of political news — including an executive order on immigration, a Supreme Court justice nomination, cabinet confirmation hearings, sanctions against Iran and additional executive action impacting the financial industry. Political ideologies aside, equity markets are trending higher.
US economic data were positive as the January employment report showed an increase of 227,000 in payrolls—greatly exceeding expectations for 175,000.
The first estimate of eurozone Q4 2016 GDP was reported at 1.8% y/y— beating analyst projections. The Bank of England— encouraged by better-than-expected economic conditions since the Brexit referendum—left interest rates unchanged and upgraded its GDP forecast.
In Asia, Chinese January services and manufacturing PMIs beat expectations. The Bank of Japan left interest rates unchanged and modestly upgraded its economic projections. Many developed countries release trade data next week.