A Macro View – Beyond the US Mid-Term Elections: Emerging Markets Look To Turn the Corner
Chart of the Week
- The Federal Reserve kept rates at their current level. In a statement released after the most recent meeting on rates, the Federal Open Market Committee (FOMC) maintained its positive outlook for the US economy, and indicated that another rate rise is likely in December, the last meeting of the year. The Committee voted unanimously to keep rates steady, and will monitor economic data closely in the coming year to determine the number of rate hikes in 2019.
- Initial jobless claims fell for the week ended November 3. In the latest of strong economic data, initial jobless claims fell from a seasonally adjusted 215,000 the previous week to 214,000. In other labor market news, the number of unfilled jobs exceeds the number of unemployed persons in the US by more than one million.
- Producer prices rose 0.6% in October from the prior month. The Producer Price Index, a measure of prices businesses receive for their goods and services, also increased from a year earlier, gaining 2.9% in value. The index has risen each year since 2016. The gains largely were driven by rising prices for services, signaling that the economy is on solid footing.
- Stocks pushed higher in US equity markets despite a moderate pullback on Friday, whereas growth and value stocks produced similar results. Meanwhile, large cap outperformed small cap stocks. Non-US developed equities also rose for the week, albeit to a lesser degree than their US counterparts, and value outperformed growth stocks. In emerging markets, stocks were slightly lower for the week, as Latin American equities sold off sharply, led by Brazil, which was one of the worst-performing markets around the globe.
Treasury yields were stable for the week, as the curve slightly flattened. Yields shorter than 10 years rose marginally, whereas yields on the 20- and 30 year notes fell. Overall, moves in the yield curve were muted, as the Fed decided to hold rates steady, with one more meeting to come before the end of the year.
Commodity prices retreated during the week, led by a sharp drop in the price of oil. In fact, oil entered bear market territory, as it was down 21% from its October highs. Global economic growth concerns have dampened the demand outlook and have left market participants searching for a bottom.
Volatility declined significantly during the week, as the CBOE Volatility Index (VIX) fell more than 10%. The US dollar was slightly higher for the week.
Consumer sentiment remained high in the US. The University of Michigan Index of Consumer Sentiment was 98.3 in November, which was down from 98.6 in October.
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