Update 05/13/19 at 8 a.m. CDT: U.S. stock futures are down sharply pre-market Monday morning with the Dow off about 500 points and the S&P 500 index down 2%. Meanwhile, the 10-year Treasury is trading at 2.4 % in a flight-to-quality trade after China announced retaliation with higher tariffs on a range of U.S. goods. The escalation comes after trade talks ended last week without a resolution. President Trump tweeted this morning that the trade situation could “get worse” if there is retaliation, and the markets have reacted to the news.
Last week: Global stocks declined last week, with the markets focusing on U.S.-China trade tensions. The S&P 500 ended down 2.1%, its worst week year-to-date. International developed stocks (MSCI EAFE) declined 2.6%, and emerging market stocks (MSCI EM) were down 4.5% for the week. Bond yields declined as investors sought safe-haven assets, with the 2-year and 10-year Treasuries trading at 2.25% and 2.45% respectively at week-end. Economic data on producer and consumer prices showed signs that inflation remains in check, with April’s headline U.S. CPI coming in at a 2% increase, year-over-year, below expectations.
This week: Market participants will see data from U.S. retail sales, industrial production and U.S. housing starts this week. In Europe, a key focus will be the European Parliamentary Elections later this month, May 23 – 26. These elections will be important for monetary policy going forward as current ECB President Mario Draghi’s term expires in October this year.
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