The NASDAQ composite index climbed to a fresh record after the release of Friday’s jobs report.
The S&P 500 is 10 percent higher from the trough recorded on February 9, and fixed income markets aren’t showing any signs of anxiety, with US 10-year bonds yields remaining well below the three percent critical level.
Appetite for risk spread to Asian markets today with the Nikkei 225, Hang Seng and Kospi all advancing more than one percent. Futures also indicate a positive start to Europe today.
Other factors that boosted appetite for risk last week were Trump’s acceptance of a meeting with North Korea’s Kim Jong Un, though I didn’t see it as a game changer for equity investors. News that the US has opened the way for more exemptions from its steel and aluminium tariffs on Friday may have indicated that we’re still far from an all-out trade war.
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However, it seems now that Trump’s target is not Canada, nor Mexico or the EU, but China. China’s minister of commerce, Zhong Shan, said China does not want a trade war and will not initiate one, but warned that any trade war with the US would only bring disaster to the world economy.
This week, US economic data will be closely scrutinized, particularly February’s CPI report, as it’s just a few days before next week’s federal reserve meeting.
Consumer prices are expected to have cooled down last month after surging 0.5 percent in January, but the headline CPI is still forecasted to rise 2.2 percent YOY, from 2.1 percent.
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Investors are likely to give more attention to the core CPI, and if it remained steady at 1.8 percent there would be no reason to think that the Fed will take an aggressive stance when it meets.
Retail sales are expected to rebound after falling for two consecutive months. If they met the anticipated 0.3 percent rise, this may suggest that the tax cuts are finally encouraging consumers to save less and spend more.
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