September 11th – Weekly Update

  • Stocks stumbled in a volatile, holiday shortened week dominated by political headlines. North Korea’s claim it detonated a hydrogen bomb over the weekend pushed markets down. Markets partially recovered on news of a debt- ceiling deal, but pulled back as Hurricane Irma approached Florida. Oil prices spiked midweek, then ended flat. The ten-year U.S. Treasury yield fell from 2.17% to 2.05%. The U.S. dollar continued to slip against other major currencies, particularly the euro and yen.
  • The week’s key policy story had to be President Trump’s unexpected deal with Democrats for a three-month extension of the government’s funding and borrowing limits, along with a $15 billion relief package for victims of Hurricanes Harvey and Irma. The measure passed both the Senate and House, and the president signed it on Friday. Treasury Secretary Steven Mnuchin said the agreement cleared away legislative obstacles, offering a window to press ahead on tax reform.
  • The European Central Bank maintained policy settings as expected, sticking with its deposit rate at -0.4% and monthly QE target of €60 billion. The bank sees QE running until the end of December or beyond if needed, and reiterated it can be increased and extended should the outlook worsen. The ECB would not commit to specific dates for QE changes, but did say most decisions will be made in October.
  • U.S. nonfarm business-sector productivity growth was revised up to 1.5% for the second quarter, faster than first estimated but still somewhat sluggish. Output rose 4% from the first quarter while hours worked were up 2.5%.
  • IHS Markit’s eurozone composite PMI index held steady at 55.7 in August. The index has signaled expansion since mid- 2013. Britain’s service industry PMI fell to 53.2 in August from July’s 53.8, suggesting that the UK’s economic growth path is diverging from the eurozone.
  • China increased its exports 5.5% yearover-year in August, slower than July’s 7.2% rise but steady enough to prop up growth. Imports expanded 13.3% in August YoY, more robust than July. As a result, China’s trade surplus narrowed to $42 billion in August, from $47 billion in July.

CPWM Weekly Market Monitor (2017.09.11)