GLOBAL MARKETS UPDATE - MONDAY 8 JANUARY 2018

Posted on 08 Jan 2018

Global stockmarkets started the year on a strong footing, while bonds retreated modestly as purchasing managers’ indices confirmed that the global economy was in robust health.

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United Kingdom

The FTSE 100 rose 0.5% over the week.

UK productivity jumped 0.9% in the third quarter, the largest jump in six years. However, productivity growth over the past decade continues to be the worst since the 1820s and the level of output remains only barely above where it was before the financial crisis.

The UK IHS Markit manufacturing purchasing managers’ index fell to 56.3 in December, down from 58.2 in the previous month. However, the average reading for the final three months of 2017 was 57.0, the highest quarterly figures recorded since the second quarter of 2014.

The IHS Markit services purchasing managers' index rose to 54.2 in December, up from 52.8 in November and its second-highest reading since April.

US

The S&P 500 rallied 2.3% over the week, with main indices touching fresh records.

The US economy added a lower-than-expected 148,000 jobs in December, but data for November was revised up from 228,000 to 252,000. After revisions, job gains have averaged 204,000 over the past three months, helping the unemployment rate to hold steady at 4.1%, the lowest it has been since 2000.

Average hourly earnings rose to 2.5% on an annual basis, up from 2.4% in November. 

The ISM non-manufacturing purchasing managers’ index slipped to 55.9 in December, compared to 57.4 in November.

The ISM manufacturing purchasing managers’ index rose to 79.7 in December, close to a 13-year high.

Europe

The Eurofirst 300 rose 2.1% over the week.

The IHS Markit eurozone composite purchasing managers’ index rose 58.1 in December, up from 57.5 in November and highest level since February 2011. The eurozone manufacturing purchasing managers’ index in December hit 60.6, its highest level since the survey began in mid-1997.

Eurozone consumer prices rose 1.4% year-on-year in December, down from 1.5% in November. Core inflation held steady at 0.9%.

However, producer price inflation rose to a year-on-year rate of 2.8% in November.

German retail sales rose 2.3% in November, compared to the same month the previous year, the fastest rate of increase since October 2016.

Japan

The Nikkei 225 surged 4.2% over the week to reach its highest level since 1992.

The Nikkei-Markit Japan manufacturing purchasing managers’ index rose to 54 in December, up from 53.6 in the previous month and the highest since February 2014.

Pacific Basin

In China, the Caixin-Markit China manufacturing purchasing managers’ index for December rose to a four-month high of 51.5. Meanwhile, the Caixin-Markit services purchasing managers’ index came in at 53.9 in December, up from 51.9 in November and its highest since August 2014.

China’s official manufacturing purchasing managers’ index slid to 51.6 in December, down slightly from 51.8 recorded in November.

In South Korea, the Nikkei-Markit manufacturing purchasing managers’ index slipped to 49.9 in December down from 51.2 in November due to a slowdown in new orders from China and Japan.

Emerging Markets

The Nikkei-Markit India purchasing managers’ index rose to 54.7 in December, up from 52.6 in November, its highest level since December 2012.

Bonds

The yield on the 10-year US Treasury bond rose 7bps over the week to close at 2.48%. The yield on the two-year note closed at 1.96%.

Commodities

Commodities rallied, with the Bloomberg Commodity index hitting its highest level since 2014, amid expectations that robust global growth would increase demand.