A choppy week of trading capped off a strong first quarter of 2019. In the end, the S&P 500 Index posted its best quarterly price return since the third quarter of 2009. Still, stock market activity was again overshadowed by the Treasury market after last week’s inversion of several parts of the yield curve was followed up with more downward pressure on interest rates, spurring a “March Madness for Yields.”
On the economic front, a string of mostly downbeat housing market data was accompanied by mixed gauges of consumer sentiment, a downwardly-revised final estimate of fourth quarter 2018 GDP, and a reading on personal consumption expenditures, including the Federal Reserve’s preferred inflation measure, that indicated consumer spending growth ticked higher month over month but missed consensus expectations. “Investors took this week’s data in stride,” said LPL Chief Investment Strategist John Lynch. “Though economic growth moderated in the fourth quarter and housing data remains somewhat lackluster, the fundamental backdrop for the U.S. economy remains supportive and the recent drop in interest rates provides a tailwind for housing.”
Overseas, European stocks held up amid mostly disappointing economic data and a volatile week of Brexit-related headlines as the U.K. nears its March 31 deadline. Prime Minister Theresa May orchestrated an eleventh-hour vote on a watered-down version of her twice-defeated bill, sweetening the offer—to no avail—by agreeing to resign once Brexit is delivered. A range of options remain on the table following the third unsuccessful vote, including a second referendum, though the European commission warned that a no-deal Brexit was now “likely.”
Asian equities were mostly lower despite trade progress and China’s latest Beige Book report, which showed an “unmistakable first-quarter recovery” after the government’s monetary stimulus efforts in the latter half of 2018 helped stabilize its economy. Meanwhile, Japan’s Nikkei trailed regional benchmarks with an $18 billion stimulus package passed as a partial offset to the looming consumption tax hike failing to support equities.
The week ahead will see several important economic announcements, with ISM and nonfarm payrolls headlining the U.S. docket. Abroad, Brexit will remain in the European spotlight, though a basket of countries will post closely-watched PMI data, including Japan, China, and the composite Eurozone. Track these and other important events on our Weekly Global Economic & Policy Calendar.
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