Market in a Minute: April 9–13, 2018
Global equities climbed last week despite lingering worries over trade conflicts and a potential military strike against Syria. (Writing on Saturday morning, we note this strike occurred last night, after our markets closed.) Mideast tensions boosted oil prices to their highest levels since 2014, up by $5/barrel last week. Rising gas prices, already showing up at the pump, will likely rise further as the driving season begins. Volatility (per the CBOE’s VIX) fell to 17.4 from 21.5.
News flow regarding trade frictions – and ongoing or potentially soon-to-be-launched trade negotiations – were relentless.
Early focus was on Chinese president Xi Jinping’s seemingly conciliatory comments. His response to the potential of $100 billion more in tariffs on imports from China spoke of steps China will take to open Chinese markets. Financial markets welcomed his remarks, viewing them as aimed at improving US/China trade relations. Chinese officials later stated Xi’s speech was not a concession; that China is prepared to retaliate. President Trump responded that he wouldn’t call the present action a trade war, but rather a negotiation.
Progress has been made on NAFTA, but it is unlikely that a deal will be announced during the Summit of the Americas in Peru over the weekend.
Pressure from farm interests prompted Trump to instruct the US trade representative and the head of his economic council to explore reentering negotiations on our joining the Trans-Pacific Partnership, albeit only on terms more favorable than originally negotiated.
Minutes of the latest FOMC meeting were unsurprising. They showed the Fed to be increasingly confident it will reach its 2% core PCE (personal consumption expenditures) goal. Some members said an upbeat economic outlook might make a slightly steeper path of rate hikes necessary.
March CPI readings showed a firming inflation trend, one that is likely to keep the Fed on its current track.
Earnings season kicked off Friday amid high expectations for improved profits following the corporate tax rate drop. Analysts expect 17.2% S&P 500 earnings Q1 growth. Three big money-center banks (Citigroup, JPMorgan Chase and Wells Fargo) kicked off the season with upbeat reports that beat analysts’ forecasts.
The European Central Bank’s most recent meeting minutes noted risks to the economic outlook from increasing trade tensions and a stronger euro.
Mid-east tensions further escalated by more than just the situation in Syria. Pro-Iranian rebels in Yemen launched a missile attack on Saudi Arabia. Saudi air defense forces intercepted three missiles, one over Riyadh and two over the southern areas bordering Yemen.
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