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.
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 equities ended higher amid strong economic data and political wrangling. The new Trump Administration dominated the media. As always, our political commentary is non-partisan, focused solely on assessing policies’ potential impact on stocks.
President Trump made headlines by signing several executive orders and memos on healthcare, trade, immigration and other policy areas. US data showed continued economic strength, but were mixed compared with expectations. IHS Markit’s preliminary January manufacturing and services Purchasing Manager Indexes (PMIs) exceeded expectations at 55.1. Non-US data were light this week.
UK Q4 GDP met expectations, rising 2.4% annualized on strong retail, hotel and restaurant spending. In the eurozone, IHS Markit’s January composite PMI hit 54.3, narrowly missing forecasts, while M3 money supply beat expectations at 5.0% y/y. Japanese December import and export growth both accelerated. Most countries release January manufacturing and service surveys. The US reports November home prices, December personal income and spending and January employment. The eurozone posts Q4 GDP, January CPI and December retail sales. The Fed and the Bank of England release interest rate decisions.