Weekly Update - June 01, 2018
- Stock markets delivered mixed results for the holiday-shortened week as geopolitical uncertainty kept investors guessing. Political turmoil in Italy induced a sharp sell-off of southern European debt. Just as markets adjusted, came news that the Trump administration would impose tariffs on Canadian, European and Mexican aluminum and steel imports, in addition to earlier announced tariffs on Chinese industrial goods. As prospects of a trade war heated up, oil prices fell and gold prices ticked higher.
- Markets got a lift on Friday from news that the U.S.-North Korea summit might be back on. Another boost came from a strong U.S. jobs report — though a Trump tweet clouded its impact by hinting at the results more than an hour before the official announcement. The early hint sent U.S. Treasury prices down and yields up; the 10-year yield, which had fallen to 2.77% during the week, rose to about 2.90%.
- U.S. nonfarm payrolls rose by 223,000 in May, ahead of expectations. The unemployment rate dropped to 3.8%, its lowest level in more than eight years. Average hourly earnings rose 2.7%, better than expected but not likely to accelerate inflation.
- April consumer spending rose 0.6% vs. estimates of 0.4%, the highest level in five months. The Core PCE price index, which the Federal Reserve watches closely, was up 0.2% for April and 1.8% year-over-year. The Conference Board’s index of consumer confidence rose to 128 in May, near an 18-year high.
- The March S&P/Case-Shiller 20-city home price index increased by 0.5%, below expectations of 0.7% but still a rapid rise. April pending home sales posted a surprise 1.3% drop.
- ISM manufacturing rose to 58.7 in May from April’s 57.3, ahead of estimates of 58.1. New orders were also up to 63.7 from April’s 61.2, marking the thirteenth consecutive month with a reading above 60.
- The Department of Commerce revised 1Q18 GDP growth from 2.3% to 2.2%, citing falling private inventory and residential fixed investment, and rising imports.
- Japanese monthly retail sales rose 1.4% in April but year-over-year department store and supermarket sales fell, a sign, consumer spending is lagging despite wage growth.