Global Stocks Gain, Chinese Trade May Remain Sluggish
Last Week Review
Global stocks gained 1.3% — and are up nearly 21% this year — with help from a positive U.S. job report. Further, the U.S. and China appear to be moving towards an initial trade agreement.
Fed Cuts Rate
The key interest rate was cut 0.25%. Afterwards, the Fed said it will base any more moves on progress in the economy rather than proactively to sustain growth. This means the Fed is on hold, but they may step in if the economy deteriorates. Futures indicated a 22% probability of a December Fed rate cut. The yield curve flattened somewhat later in the week.
Brexit Deadline Moved with U.K. Election
The new January 31 deadline shifts investor attention to the U.K. election in December. The election introduces more uncertainty, especially given volatile voter polls. A decisive Conservative Party victory likely means a fast attempt to pass the current withdrawal bill. It’s less clear what happens with a Labour Party victory or otherwise.
U.S. Jobs Growth Tops Expectations
The U.S. added 128,000 jobs in October, well above estimates. The unemployment rate ticked up to 3.6% while wages rose 3.0%. Inflation still remained under the Fed’s 2% target with core personal consumption expenditures at 1.7%.
Health Care Earnings Strong
The health care sector has the strongest sales and earnings growth among companies in the S&P 500 Index who have reported third quarter earnings. In aggregate, sales and earnings growth are ahead of estimates, with 72% reporting so far.
This Week Preview
Walt Disney May Give Update on Streaming Service amid Increasing Competition
The company will report earnings on Thursday, and investors will look for the update as competition escalates between Disney, Netflix, Amazon Prime, HBO and others. The majority of the companies left to report third quarter earnings are in the consumer discretionary, technology and health care sectors.
Trade War Update: Little Improvement Expected in Chinese Trade
China’s imports are expected to rebound modestly while exports may drop some. China and the U.S. expect a mini-deal before year-end, where China may purchase more farm products while the U.S. delays planned tariffs. China’s imports and exports have fallen on trade tensions, but the deal — if completed this year — may aid growth next year.
Bank of England Economic Forecasts
At its meeting on Thursday, the central bank’s economic forecasts likely will reflect a lower risk of the U.K. exiting the European Union without an agreement. No policy change is expected.