Weekly Market Commentary Update As of November 7th, 2014 The Economy - SEI views economic growth in North America and the U.K. as slow but well established, while the global economy is still a work in progress. The euro area and several key emerging markets continued to struggle. Japan’s economy is still grappling with the effects of April’s sales tax hike. The U.S. labor market continued to progress, albeit at a slow pace. The government reported that nonfarm payrolls grew by 214,000 in October, below consensus expectations of 240,000. The unemployment rate fell to 5.8%. Low wage growth continued, which should allow the Federal Reserve (Fed) to keep interest rates down for the foreseeable future. According to ADP’s employment report, U.S. private-sector payrolls grew by 230,000 in October, in line with expectations. Announced layoffs rose sharply in October, according to Challenger, but this was from a 14-year low in September. U.S. nonfarm productivity improved by more than expected in the third quarter, and the second-quarter increase was revised upward. Unit labor costs increased by more than anticipated, but not by enough to suggest rapid inflation. The U.S. trade deficit widened in September by more than economists anticipated, driven by a notable decline in exports. Markit reported that the U.S. service sector continued to expand in October, as forecasted. The ISM non-manufacturing index gained despite coming in slightly below expectations. November factory orders fell marginally from the prior month, by slightly less than expected, according to the U.S. Department of Commerce. Home prices unexpectedly fell in the U.K. during October despite expectations of a small increase. September’s already slow advance was revised down slightly. The U.K. service sector continued to expand in October at a slower-than-anticipated pace. U.K. manufacturing accelerated modestly in October after a sharp decline in September, beating expectations and remaining above its long-term average. J.P. Morgan reported a decrease in global economic growth for the third consecutive month in October, yet remained in positive territory Emerging-markets struggled in October after rebounding for most of 2014, according to HSBC. Service-sector growth slowed in Japan during October due in part to poor weather, according to Markit, while manufacturing growth accelerated. Since the April sales-tax hike, overall activity has contracted. Economic Calendar - November 12: Wholesale Trade, MBA Purchase Applications November 13: Jobless Claims, Fed Balance Sheet November 14: Retail Sales, Import and Export Prices, Consumer Sentiment Stocks - Global equity markets were flat for the week. In the U.S., most sectors rose. Materials and consumer staples led, while health care and telecommunications lagged. Value stocks beat growth stocks and large-company stocks led small- company stocks. Bonds - Global bond markets fell for the week. High-yield bonds outperformed, followed by corporate bonds. Global government bonds lagged. Fed Chair Janet Yellen admitted that the central bank could cause turbulence in financial markets when it finally begins to hike interest rates.
Posted on: Tue, 11 Nov 2014 05:19:41 +0000