US: S&P 500 Index -0.9%, Dow -2.0%, Nasdaq -0.7%
Europe: STOXX Europe 600 -1.1%, German DAX -3.3%, France CAC 40 -2.1%, U.K. FTSE 100 +0.6%
Asia: Japan Nikkei -1.5%, China Shanghai Composite -4.4%, Korea KOSPI -2.0%
Global/Regional: MSCI ACWI -1.4% MSCI EM -3.0% MSCI EAFE-1.8%
Rates/Commodities: 10-Year Treasury yield -2 basis points to 2.90%, WTI crude oil +6.4%, COMEX gold -0.5%
With top-tier central bank meetings in the rearview mirror, the spotlight returned to global trade this week, though OPEC announcements that drove oil prices sharply higher and big banks’ stress test results stole the show later in the week. Multiple drivers made for a volatile ride in global equity markets, ultimately leaving major indexes in the red.
Drilling down, trade tensions reignited Monday following President Trump’s call for an additional $200 billion of tariffs on goods imported from China, which Chinese officials rebuked with threats of a comprehensive retaliation that included potentially targeting specific Dow components, which helped the index sustain a losing streak that ultimately lasted eight sessions. Weakness in emerging markets was widespread, underpinned by China’s Shanghai Composite, which tumbled 3.8% following the announcement to close below the 3,000 level for the first time since September 2016 and hover just north of bear market territory. Investors’ anxiety abated somewhat by the end of the week when media outlets reported that the U.S. was contemplating returning to the negotiating table ahead of the July 6 implementation of previously announced tariffs.
Elsewhere, late-week news that the first round of stress test results from large U.S. financial institutions—those deemed systemically important—failed to spur gains in the broader sector despite all 35 banks passing. “The tests remain very tough,” noted LPL Research Chief Investment Strategist John Lynch, “but increased flexibility under new bank regulatory leadership, coupled with the generally strong economic and profit backdrop, likely means favorable results in the second round of tests, followed by dividend increases and share repurchases after the June 28 announcement.” He further noted that “though this year has been a struggle so far for the financials sector, we continue to expect the sector to benefit from an eventual easing of yield curve pressures.” The energy sector also garnered attention late in the week after an announcement that OPEC and its allies would boost supply by a less-than-expected 600k barrels per day, coupled with comments from the Saudi oil minister that demand in the second half of the year could likely outpace supply by more than 1.5 million barrels, actually triggered a 5% spike in oil prices on Friday.
Looking ahead, items to monitor in the U.S. include consumer confidence, spending and income data. Inflation reports headline the overseas docket with releases out of Germany, Italy, France, the Eurozone, and Japan. See all of the important economic data due out next week in our Weekly Economic Calendar.
Important Disclosures
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Indices are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
Past performance is not indicative of future results. The tax loss harvesting and other tax strategies discussed should not be interpreted as tax advice and there is no representation that such strategies will result in any particular tax consequence. Clients should consult with their personal tax advisors regarding the tax consequences of investing.
Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit
Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor Member FINRA/SIPC
For Client Use – Tracking #1-743307 (Exp. 6/19)