Weekly Update 6/15/2018 – Central banks overshadow U.S.—North Korea summit

USS&P 500 Index +0.0%, Dow -0.9%, Nasdaq +1.3%
EuropeSTOXX Europe 600 +1.0%, German DAX +1.9%, France CAC 40 +1.0%, U.K. FTSE 100 +1.1%
Asia: Japan Nikkei +0.7%, China Shanghai Composite -1.5%, Korea KOSPI  -1.9%
Global/RegionalMSCI ACWI +0.1% MSCI EM -0.9% MSCI EAFE+0.2%
Rates/Commodities: 10-Year Treasury yield -2 basis points to 2.92%, WTI crude oil -1.6%, COMEX gold -1.4%

Major U.S. indexes went their separate ways this week as the S&P 500 Index (flat), Nasdaq (rose), and Dow (fell) all reacted differently to a plethora of headline-generating events. This included central bank meetings in the U.S., Eurozone, and Japan, the historic U.S.—North Korea summit, the approval of a high-profile merger in the telecommunications and cable industry, and better-than-expected May retail sales among other economic data. The monetary policy meetings held by the Federal Reserve (Fed) and European Central Bank (ECB) received the most attention, and rightfully so. The Fed’s rate hike announcement was a foregone conclusion, though comments in Chairman Jerome Powell’s post-meeting press conference and the Fed’s outlook for economy provided more interesting insights, as we outlined in our post-meeting blog.

Overseas, developed markets finished near flat, while the MSCI Emerging Markets Index tumbled more than 2% as trade fears and higher U.S. interest rates, which could lead to more dollar strength, helped dampen investor enthusiasm for the group. In Europe, the ECB announced it would end its bond purchases (so-called quantitative easing) by year-end as expected; however, ECB Chief Mario Draghi pledged not to raise interest rates until at least summer 2019. “The balanced approach suggests the ECB has some level of conviction in its economic outlook,” noted LPL Research Chief Investment Strategist John Lynch, “but we continue to favor U.S. and emerging markets equities over the next six-to-twelve months,” a topic we covered in a recent Weekly Market Commentary. With the exception of Japan’s Nikkei, most Asian markets fell progressively throughout the week; trade tensions re-escalated Friday as the U.S. introduced tariffs on Chinese goods worth about $50 billion, to which China immediately retaliated.

Next week, the housing market will be in focus on the domestic front, while Markit Purchasing Managers’ Index data headlines the economic data releases overseas with figures for France, Germany, the Eurozone, and Japan due out. Get the details in our Weekly Economic Calendar.


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