It has been a difficult period for stocks of late. An escalation in trade war talks between the world’s two largest economies has seen the US stock market, as well as other global markets, take a hit. However, data releases from the US this week may well suggest that the US economy is robust enough to carry through with President Trump’s threat to levy 25% duties on all goods imported from China.
Meanwhile, whilst the forex markets have been bearish on the US Dollar, the US stock market has shown a bit more confidence. It seems the best stock trader is more impressed with the US data than the best forex trader. So, what is getting stock market analysts so excited that they think the US can shrug off trade war fears? Let’s have a look:
The US employment market is in a healthy state. At 3.6%, the unemployment rate is at a near 50 year low. This week, the release of the U.S. weekly jobless claims underscored the robust labor market in the US. The number of people filing applications for unemployment benefits declined more than anticipated last week, suggesting sustained strength in the labor market that should bolster the US economy as growth eases.
The US Commerce Department reported on Thursday 16thMay that housing starts increased 5.7% to a seasonally adjusted annual rate of 1.235 million units in April. The gains were fueled by rising construction of both single and multi-family housing units. Not only did U.S. housing starts rise more than expected in April, activity in March was revised upwards than initially thought. This all suggests that declining mortgage rates were giving some support to a housing market which up and till recently, had been struggling.
The Weak Chinese Stats
This week, in amongst the stock news the world’s second largest economy reported unexpectedly weaker growth in both retail sales and industrial output for April. Retail sales in China last month increased 7.2% from a year earlier, the slowest rate since May 2003. Clothing sales declined for the first time since 2009. Industrial output growth slowed more than expected, registering 5.4% in April on a yearly basis. Although to add context, this was a pull back from a four and a half year high in March. Overall, Chinese data points to a slowing of momentum, while new factory orders from domestically and internationally remained sluggish. In short, China doesn’t need a trade war.