Stocks around the globe moved higher in early trading this week following last week’s broad sell-off. Encouraging data on the economic front showed an acceleration in China’s recovery as both retail sales and industrial production came in better than expected. In the U.S., data came in softer than expected as core retail sales declined by 0.1% compared to forecasts of a 1% increase. Retail sales are a key component of consumer spending, and this is the first reading on this measure since unemployment benefits expired at the end of July. Consumer spending represents roughly two-thirds of the U.S. economy and continued weakness could put pressure on policymakers for further stimulus going forward. Industrial production data was sluggish as well, showing declines in auto manufacturing, utilities, and mining. All eyes will be on the Federal Reserve this week as they conclude their last meeting prior to the election on Wednesday. Investors are looking for the Fed to remain dovish with monetary policy, and expectations are for the Federal Open Market Committee to reaffirm the expectation of 0% interest rates for the foreseeable future. Investors will also be keeping an eye on international developments as Boris Johnson looks to renegotiate part of last years agreement with the European Union ahead of the no-deal Brexit deadline of December 31. Interest rates were relatively flat this week, with yields on the 2-year and 10-year Treasury notes trading around 0.14% and 0.67% respectively mid-week.
Source: Morningstar, JPM, Bloomberg, GSAM