Markets rose in a week of quiet, pre-holiday trading, benefiting from easing trade tensions and signs of sustainable economic fundamentals. The major U.S. stock indexes finished the week strongly as the S&P 500 extended its gains from November. UK and European bourses got a lift from new Brexit clarity; China gained, other Asian markets were mixed.
The bullish market mindset seemed to base itself on a narrative of de-escalating trade tensions, renewed central bank balance sheet expansion, consumer-led U.S. economic resilience, hints of global economic stabilizing and expectations for a rebound of earnings growth. Bond yields rose across the curve during the week; the ten-year U.S. Treasury reached 1.92%. Oil and gold prices rose modestly; the U.S. dollar gained against a basket of major currencies.
Personal consumption expenditures (PCE) rose 0.4% in November, better than October’s 0.3% and marking a year-over-year increase of 2.4%. Core PCE was up 0.1%, below expectations. Personal income rose by 0.5% versus expectations of 0.3%.
The final December reading of the U. of Michigan consumer sentiment index came in at 99.3, above the preliminary 99.2 reading and better than November’s 96.8 final. Separately, the October JOLTS report showed job openings up by 235,000 to 7.3 million, in contrast with 2019’s downtrend.
The final revision of U.S. 3Q19 GDP met forecasts at 2.1%. Regional manufacturing surveys were ambiguous — the December Philadelphia Fed outlook read 0.3 versus consensus 8.8 and November’s 10.4. The Empire manufacturing survey read 3.5, below the 5.0 consensus but above November’s 2.9. November industrial production rose 1.1%, pointing to widespread gains though activity remained muted.
China’s industrial production rose 6.2% YoY in November, better than consensus 5.1% and 4.7% in October. Retail sales picked up to 8.0% versus 7.2% in October. Eurozone composite PMI missed as manufacturing contraction unexpectedly deepened. UK composite PMI missed expectations in both manufacturing and services. Japan flash manufacturing also remained in contraction.
November U.S. existing home sales came in at 5.35 million, down 1.7% month-over-month and below October’s downwardly revised 5.44 million. By contrast, the NAHB housing market index rose to 76 in December, its highest point since 1999.