Today we look at varying data across the developed and emerging markets for the past week. In the developed markets we’ll be looking at the USA, Japan, and Eurozone; while emerging markets will be represented by Ukraine, China, and Brazil.
Developed:
USA: The US experienced mixed data last week which led to much of the domestic market looking abroad for movement indicators. Retail sales increased from January to February, a welcomed change considering the effect weather has had on retail over the past few months. Initial jobless claims fell by 9,000 in February, while continuing jobless claims fell by 48,000. At the same time, JOLTs job opening report showed 3.97 Million jobs available; it represented an increase of 60,000 job openings from the previous month.[1] All great news for US employment data. Core Producer Price Index (PPI, a good indicator of business demand and leading inflation) fell in February, signaling weakening demand and a continued lack of inflation. Thompson Reuters/University of Michigan consumer sentiment fell from 81.6 to 79.9 in February; however additional data showed a 1.1% rise in expectations of wage increases by consumers.[2]
Japan: Japan experienced mixed data last week as well. 4th Quarter GDP was revised down to .7% from 1.0%, while BSI large manufacturing conditions improved from 9.7 to 12.5. Core machinery orders were up 23.6% year over year, however Industrial production missed expectations by 0.2%, with only a 3.8% increase month over month.[3] This data provides indications that 1st quarter performance should be an improvement, but that the overall economic environment is fragile.
Eurozone: Industrial production in the EU came in at 2.1% year over year in February and Spanish retail sales were up .5% year over year.[4] Two of the many troubled sovereignties from 3 years ago saw their bond auctions continue the recent trend of falling rates (Italy and Spain). On the negative side German and French notes saw their rates rise as tensions continued in Ukraine.
Developing
Ukraine: The situation in Ukraine could have an impact on exports from EU countries; as well stability and safety in investments in the region continues to be a growing concern. Sundays vote for Crimea to become independent, does not lower the escalation potential, but increase the potential for economic impact.
China: Data out of China continued to disappoint last week as Industrial output increased by 8.6% in February (year over year). This may seem like a large gain, however the expectation was for an increase of 9.5%, which was already lower than December at 9.7%.[5] What may pose a larger concern is what appears to be a mixed signal from the Chinese Premier, indicating that a breach in the expected 7.5% GDP for 2014 (down from 2013 GDP at 7.7%) was not a set percentage to prompt government action if missed.[6]
Brazil: Lastly, the much beleaguered Brazil… They saw their retail sales increase 6.2% year over year in February. Also, IBC-Br economic activity increased 1.26%, while expectations were for a .7% increase.[7] Both welcomed pieces of data after recent trends.
In all, it’s not “Developed vs. Developing”. A well-blended portfolio will have varying representation of each, however weighting (over/under) is always a consideration. Today’s economy is absolutely global; as seen by the impacts China and Ukraine had on the rest of these markets as stock prices retreated.
If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.
Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment. Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.