Global stocks sounded an upbeat note, ending a volatile stretch with gains for the week and first quarter of 2019. Weaker than expected inflation data effectively removed worries that the Federal Reserve might impose another interest-rate hike this year. This lifted sentiment across the board, overcoming doubts about global economic growth and prompting rallies of both bonds and stocks. By quarter-end, stocks had recovered most of the losses sustained at the end of 2018.
As bond prices rose, the widely watched 10-year U.S. Treasury yield fell to 2.41%, at mid-week reaching its lowest level since December 2017. The U.S. dollar gained for the week against a basket of currencies, but was flat for quarter. Oil prices gained for the week and quarter. Gold prices declined for the week after the soft inflation report, and were flat after a volatile quarter.
Personal-consumption expenditures (PCE), an inflation price index that the Federal Reserve watches closely, fell 0.06% in January from December and rose only 1.37% year-over-year, its smallest gain in more than two years. The core PCE index, which excludes the volatile food and energy components of PCE, rose 0.06% in January and 1.79% YoY, an 11- month low.
Real gross domestic product (GDP) increased at a 2.2% annual rate in 4Q18, down from initial estimates of 2.6%. In 3Q18, real GDP increased 3.4%. The 4Q18 pullback reflected deceleration in private inventory investment, PCE and federal, state and local government spending. The downturns were partly offset by an upturn in exports and acceleration in nonresidential fixed investment. Also, real gross domestic income (GDI) increased 1.7% in 4Q18, compared to an increase of 4.6% in 3Q18.
March consumer confidence came in at 124.1, declining from February’s 131.4. Deterioration in the present situation assessment was the main cause; this measure has weakened since last summer.
U.S. house prices rose 0.6% in January, up 0.3% from December, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). YoY, house prices were up 5.6%. Elsewhere, February housing starts fell 8.7% vs. January to 1.2 million, the biggest decline in eight months.