Most of the major indexes ended the holiday-shortened week with modest gains. The technology-heavy Nasdaq Composite Index performed best, helped by strength in semiconductor stocks early in the week. Positive results from Hewlett-Packard gave a further boost to tech shares on Friday. Utilities and materials stocks also performed well, while real estate shares lagged. Consumer staples shares also under-performed, as WalMart sold off early in the week following an earnings’ miss and guidance that disappointed investors.
European stocks ended the week flat to mixed amid relatively low volume. Despite a heavy week of corporate earnings reports and positive economic indicators, major indexes in the region were subdued. The pan-European index STOXX 600 index was essentially flat as investors seemed to be on guard about the prospect of rising inflationary pressures. The German DAX 30 ended marginally higher following reports of solid demand for German exports. Britain’s FTSE 100 ended marginally lower, weighed down by some disappointing corporate earnings and a report that the unemployment rate rose slightly in the fourth quarter of 2017.
Data suggest that Japan’s manufacturing activity and exports remain positive. Purchasing managers’ index figures released on Tuesday fell slightly to 54.0 in February 2018 from 54.8 in January but remain solidly in expansive territory. Japan’s exports rose 12.2% in January versus the same month last year, exceeding the forecast gain of a 10.3% rise and marking the 14th straight month of gains. Combined with a slight decline in import growth, the rise in exports helped narrow the country’s trade gap to ¥943 billion versus ¥1,092 billion in January 2017. In addition, employment increased at a faster pace and saw its best growth in 11 years.
The Week Ahead
The second-largest economy in the world (China) will reveal their manufacturing and non-manufacturing numbers for February. Economists are expecting the manufacturing figure to rise from 51.3 to 51.4 in January, and the consensus is for a reading of 55.2 for non-manufacturing, down from 55.3 in January. The manufacturing sector has been growing at a slower rate recently, but keep in mind the September reading was the highest since 2012. Conversely the non-manufacturing industry has risen in the past four months and is near a multi-year high.
On Wednesday, Europe released its CPI figures -the lack of inflation in Europe has been one of the more puzzling aspects of the resurgence in economic activity across the region in recent months. Multi-year highs in PMIs have shown that growth is steady and unemployment is falling, yet inflation has remained stubbornly low. Last week’s final CPI rate for January showed prices at 1.3% and core prices at 1%. While GDP suggests the economy is doing well, consumer spending has remained subdued. With the European Central Bank (ECB) on course to exit its asset purchase program this year, a higher euro will continue to cause problems for the ECB in meeting its inflation target.
All the best
CEO
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Stuart Yeomans 