US: S&P 500 Index -0.5%, Dow -0.5%, Nasdaq -0.7%
Europe: STOXX Europe 600 +0.6%, German DAX +0.6%, France CAC 40 +1.3%, U.K. FTSE 100 +0.7%
Asia: Japan Nikkei +0.8%, China Shanghai Composite +1.0%, Korea KOSPI -0.7%
Rates/Commodities: 10-Year Treasury yield +9 basis points to 3.06%, WTI crude oil -0.2%, COMEX gold -2.0%
Global equities moved modestly lower on the week, as investors expressed renewed concern over rising interest rates. The yield on the 10-year Treasury jumped to multi-year highs on Tuesday, following the release of retail sales data for April which showed accelerating consumer demand. Energy stocks outperformed for the week, as oil continued to consolidate recent gains above $70/barrel. However, despite the recent increase in prices at the pump, we believe that prices will stabilize and that OPEC, its partners, and U.S. production growth should be able to compensate for reduced Iranian supply. Further, as Chief Investment Strategist John Lynch pointed out, “while consumers will feel the impact of higher oil prices, even in the worst case scenario we would expect the impact to be half that of the benefit of recent tax cuts.”
Overseas action continued to be dominated by trade talks, as the Thursday deadline set by House Speaker Paul Ryan for a new NAFTA deal passed without any progress, and talks between the White House and China contributed to market uncertainty. Economic data disappointed as Japan’s streak of eight-consecutive quarters of gross domestic product (GDP) growth came to an end, and the Eurozone Citi Economic Surprise Index (which measures economic surprises compared to consensus expectations) fell to its lowest level since 2011.
Next week is highlighted by the release of the Federal Open Market Committee minutes from the May meeting, as investors will continue to look for clues as to if two or three more hikes are likely in 2018. In U.S. economic data, the Chicago Fed National Activity Report will be released Monday, while existing home sales and durable goods orders come Thursday and Friday, respectively. Overseas, GDP and Purchasing Managers’ Index data highlight the docket in Europe, while Japan reports trade balances for April and inflation data for May.
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