Commentary Weekly Market Update As of March 14, 2014 The Economy The U.S. economy continued to exhibit softness this week. Reports out of the U.K. remained favorable, while Europe still showed signs of stabilization. In Asia, data from China and Japan were discouragingly weak. SEI maintains its expectation for the global economy to steadily expand. Markit’s Global Business Outlook Survey for February reported a two-year high in business optimism. However, there were sharp differences between advanced economies (which were doing well) and emerging markets (where expectations remained pessimistic). Retail sales rebounded slightly in February, although the January decline was deemed worse than initially estimated by the U.S. Department of Commerce. Jobless claims, which had been in a slight uptrend since last fall, fell sharply in the week ending March 8; this is an encouraging sign for the labor market. The U.S. Department of the Treasury’s Job Openings and Labor Turnover Survey for January revealed no change from the recent slow-but-steady pace of labor-market improvement. Producer prices fell in February, driven by the service sector, while goods prices rose overall. February import and export prices gained from the prior month at the upper end of expectations. However, both were down by more than 1% from a year earlier. Wholesale inventories moved higher and sales dropped during January, according to the U.S. Department of Commerce. Weather appears to have played a significant role, keeping a lid on concerns about broader economic weakness. The Thomson Reuters/University of Michigan consumer sentiment index eased by more than expected in March. Although below the highs of 2013, the index remains above its post-recession average. The National Federation of Independent Business reported that its small business optimism index fell unexpectedly in February, as respondents overall indicated a weaker sales outlook. The U.K. trade deficit widened in January, due to continued domestic economic strength (reflected in rising imports) and weakness abroad (reflected in falling exports from the U.K.). Eurozone industrial production was lower than expected in the first month of the year, although it was still up by more than 2% from January 2013. Employment rose slightly in the European Union from the third quarter of 2013 to the following quarter, but was still below the fourth quarter of 2012. Economic activity in Japan continued to improve at a subdued pace, while producer prices fell, pointing to the government’s desire for higher inflation struggling to gain traction. Machinery orders were surprisingly strong, however. Chinese industrial output slowed by more than expected in the first two months of 2014, and at the slowest January-to-February pace since 2009. Retail sales during the same period were also disappointing. Economic Calendar March 17: Empire State Manufacturing March 18: Consumer Price Index, Housing Starts March 19: FOMC Rate Decision March 20: Initial Jobless Claims, Existing Home Sales Stocks Global equity markets fell for the week. In the U.S., value stocks beat growth stocks and small-company stocks outperformed large-company stocks. All sectors were positive, with the exception of utilities. Health care also lagged, while financials and industrials outperformed. Bonds Global bond markets rose for the week. Global government bonds bonds did relatively best, followed by corporate bonds. High-yield bonds lagged. U.S. Treasurys rallied sharply this week, as geopolitical risk from the Ukraine crisis and concerns over the slowing of China’s economy drove investors to safe-haven asset classes.
Posted on: Mon, 17 Mar 2014 16:21:32 +0000
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