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Newsletter: In the Markets – Week-Ending May 12th, 2017

, Friday May 12, 2017, by Categories: Uncategorized

Newsletter: In the Markets – Week-Ending May 12th, 2017

Crystal Brook Advisors

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United States:  For the fifth consecutive month, and easily beating expectations, import prices increased in April. Petroleum prices, up 1.6 percent, more than reversed a modest decline in March. Excluding petroleum, import prices increased 0.4 percent and are up 1.4 percent over the past year. Strengthening business sector activity, as reported in Q1 GDP, helps reflect the modest inflationary environment. (1)  Import prices of Chinese goods remain weak, with the annual rate trending in deflationary territory since October 2014. (1)

 

Europe:  Europe’s economy is strengthening, the European Union said Thursday, raising this year’s growth forecast, despite geopolitical risks that could undermine its fifth year of recovery. (2)  Gross domestic product in the 28-country EU will grow by 1.9% in both 2017 and 2018, the bloc estimated in its latest economic outlook, up from its February forecast of 1.8%. (2)  It raised its GDP forecast for the 19-member eurozone to 1.7% this year from its previous forecast of 1.6% and maintained its estimate of 1.8% economic growth in 2018. (2)

 

Asia:  The Bloomberg Commodity Index rose for a third day, recovering from a 16-month low on May 9. European stocks struggled for direction following the biggest drop in three weeks Thursday as investors assessed global earnings and the appetite of U.S. consumers to keep spending. The Bloomberg Dollar Spot Index headed for its best week of the month as bets stack up on a Federal Reserve interest-rate increase next month. (3)  Accelerating German economic growth failed to ignite stocks or upset bonds as investors signaled fatigue with an equity rally that pushed U.S. stocks near a record high. Treasury yields fell, tracking a move in core European government bonds as gold extended a rebound from a two-month low and industrial metals including copper, nickel and zinc advanced. Reports Friday, forecast to show U.S. inflation and retail sales both increased last month, may back the case for the Fed to keep raising interest rates. (3)

 

Latin America:  Mexico sent a stark message to U.S. President Donald Trump on Thursday, saying an upcoming visit by Mexican officials to China showed Latin America’s second largest economy had other places to export to if he tore up the NAFTA trade deal. (4)  The North American Free Trade Agreement (NAFTA) underpins Mexico’s economy, prompting the government to try and diversify away from the United States, which takes 80 percent of its exports. (4)  Trump indicated in an interview with The Economist published on Thursday that he wanted to get the U.S.-Mexico trade deficit down to about zero. He wants to renegotiate NAFTA to get a better deal for U.S. companies and workers, and has threatened to end the agreement if he does not get his way. (4)

 

Monday 5/8    

  • The S&P 500 and Nasdaq composite marked all-time highs Monday, while Apple (AAPL) outperformed nicely in the Dow Jones industrial average, rising nearly 3%. (5)

 

Tuesday 5/9

  • And the Volatility Index, or Vix, which captures expectations for future stock market volatility based on prices in the options market, finished Monday at the lowest level in its 27-year history other than three days in December 1993. (6)

 

Wednesday 5/10

  • In South Korea, the Kospi index SEU, -0.45%  gave up early gains and fell 1% as heavily-weighted Samsung Electronics 005930, +0.70%   slumped 3% on profit-taking. Moon Jae-in’s victory in the country’s presidential election Tuesday has prompted investor caution about ties between South Korea and the U.S. (2)

 

Thursday 5/11

  • The Dow headed into Thursday’s session toting a 0.3% loss so far for the week. The Nasdaq was up 0.5%, while the S&P 500 held a narrow gain and was trading less than 0.5% below its March 1 high. (5)

 

Friday 5/12

  • The CBOE Volatility Index VIX, +1.32% a measure of the market’s expectation for volatility over the coming 30 days, has been trading near record lows for days, closing at a level not seen in 23 years earlier this week. (2)

 

Contributor: Thomas Padula

 

Source: (1) Wells Fargo Economic Group, (2) Market Watch, (3) Bloomberg, (4) CNBC, (5) Investor’s Business Daily, (6) The New York Times

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