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Weekly Update – March 02, 2018

  • U.S. equities ended the week lower amongst concerns connected with impending steel and aluminum tariffs. Oil and gold also lost ground. The 10-year U.S. Treasury note finished the week at approximately 2.85%.
  • President Trump announced that, based on national security grounds, he will impose steep tariffs on steel and aluminum imports. The tariffs are expected to impact a broad group of countries, including some U.S. allies. While protectionist concerns had been ramping over the past couple of months, they had largely been ignored by the market given thoughts that measures would be narrowly targeted in scope.
  • During a confirmation hearing in Japan’s Parliament, Bank of Japan Governor Haruhiko Kuroda reiterated a need for continued easing, noting wages and inflation have been somewhat weak. However, he also said that the bank would consider ending its easing program if inflation hit its 2% target in FY19 and economic conditions become favorable.
  • The ISM manufacturing index increased to 60.8 in February from 59.1 in prior month, ahead of the 58.7 consensus and its best reading since 2004. Details were strong (and respondent commentary was positive), but not quite as upbeat as the headline.
  • The Federal Reserve’s preferred measure of inflation, the core PCE price index, increased 0.3% month-to-month and 1.5% year-over-year in January, in line with consensus (year-over-year growth was unchanged from December). Elsewhere in the report, personal income increased 0.4% month-to-month, better than the 0.3% expected, while disposable income jumped 0.9%.
  • January durable goods orders were down 3.7% month-to-month, worse than consensus for a 2.0% drop and falling short of December’s 2.6% rise. Consumer confidence hit a 17-year high of 130.8 in January, up slightly month-to-month and logging its third consecutive increase.
  • The savings rate increased to 3.2% from 2.5%. Both the income metrics and the savings rate were bolstered by the tax overhaul. Personal spending increased 0.2% month-to-month, in line with expectations. Construction spending was flat in January vs expectations for a 0.3% increase.
  • The Euro zone manufacturing PMI saw a slight upward revision from the flash reading. The China Caixin manufacturing PMI surprised to the upside following a 19-month low in the official reading.

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