Weekly Update - March 08, 2018
- Global stock markets posted losses for the week. Investor sentiment shifted into “risk-off” mode as the China–U.S. trade negotiations grew wobbly, then worsened after the European Central Bank called off a planned interest rate hike due to darkening economic skies. The final bricks in the wall of worry were cemented into place on Friday: a severely disappointing U.S. jobs report and falling Chinese exports. Capping it all was news that China’s President Xi had canceled his trip to Florida, where he had been expected to sign a trade accord with President Trump.
- Oil prices ended flat for the week, despite production cuts from OPEC. Gold prices rose slightly. Bond prices rose as traders reacted to disappointing U.S. and Eurozone economic data. The ten-year U.S. Treasury yield decreased steadily, ending the week at about 2.64%. The U.S. dollar increased against a basket of major currencies.
- The February nonfarm payrolls report confirmed a trend of slowing U.S. employment growth. New jobs rose by only 20,000, far below estimates of 180,000 though the prior two months were revised up 12,000. The unemployment rate fell to 3.8%, just below estimates of 3.9%; the labor force participation rate was unchanged at 63.2%. Average hourly earnings were up 0.4% month-over-month and 3.4% year-over-year, both ahead of estimates.
- China’s exports and imports fell sharply in February, pointing to a worsening economic slowdown. Exports to the United States fell 26.2%, while imports from the U.S. dropped 28.6%, narrowing China’s trade surplus with the U.S. to $14.72 billion, a two-year low. Separately, Beijing lowered its 2019 GDP growth target to 6.0–6.5%.
- Service sector growth also was weak: Caixin China General Services PMI fell to 51.1 in February from 53.6 in January. New orders and employment rose slightly. By contrast, the U.S. ISM Non-Manufacturing PMI index increased to 59.7 in February from 56.7 in January.
- IHS Markit/CIPS UK Construction PMI dropped to 49.5 in February, falling into contraction as business optimism hit a four-month low. U.S. construction spending decreased 0.6% in December as investment in both private and public projects decreased. By contrast, U.S. new home sales increased 3.7%.