It was another week of solid economic data in the U.S., including: Both the ISM Manufacturing and Non-Manufacturing indices significantly exceeded forecasts.
Average hourly earnings exceeded all estimates of all those surveyed by Bloomberg, posting the largest annual gain in wages since the last recession.
Initial jobless claims came in lower than expected and nonfarm payrolls exceeded forecasts—two indications that the job market remains robust.
That said, the unemployment rate—although remaining low and at the previous month’s level–fell short of expectations. Additionally, factory orders came in below consensus estimates.
In Europe, German Services and Manufacturing PMI indices, as well as industrial production, failed to meet estimates. In the UK, a more mixed bag—with Services PMI exceeding forecasts but Manufacturing PMI falling short. Switzerland was a notable bright spot, with higher-than-expected GDP growth and stable unemployment rates.
Asian economic data was light last week. Australia’s GDP exceeded expectations, but retail sales figures missed estimates. In Japan, robust capital spending exceeded expectations while in India, GDP was stronger than expected. Meanwhile, China’s Caixin/Markit Manufacturing and Services PMIs disappointed.
In the U.S. equity market, the consumer staples and industrial sectors outperformed. Consumer staples stocks benefited from what seems to have been a rotation out of momentum/high-growth companies into what is a more stable sector with pockets of relatively lower valuations. Industrials stocks got a boost from stronger U.S. macroeconomic data and analyst upgrades. However, technology shares suffered as investors considered the risks of elevated valuations and the potential regulatory pressures on the sector. Energy shares also fell. Some operators in the oil patch were surprised by a slowdown in North American activity; additionally, oil prices ebbed.