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06/08/2016
Market Update

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The 13-nation Organization of Petroleum Exporting Countries, or OPEC, ended its meeting this week without agreeing to limit oil production; but prices remained resilient given recent supply disruptions in Canada, Colombia and Nigeria — lending credence to a claim by the newly appointed Saudi oil minister Khalid al Falih that the per-barrel price could move from around $50 to $60 by year end.
This Week
  • The 13-nation Organization of Petroleum Exporting Countries, or OPEC, ended its meeting this week without agreeing to limit oil production; but prices remained resilient given recent supply disruptions in Canada, Colombia and Nigeria — lending credence to a claim by the newly appointed Saudi oil minister Khalid al Falih that the per-barrel price could move from around $50 to $60 by year end.
  • Job creation tumbled in May to the weakest pace since 2010, with only 38,000 new positions versus the expected 162,000. The unemployment rate slid to 4.7%, although the number of job market participants also declined. Slowing job growth greatly decreases the likelihood of another Federal Reserve interest-rate hike later this month.
  • U.S. consumer spending, which drives two-thirds of the economy, advanced by 1% in April, the largest monthly gain since August 2009. Spending on vehicle sales and services helped during the month. Income also rose by a strong 0.4% for the same period.
  • Home prices increased by 0.9% in March, the biggest jump since November, according to Case-Shiller’s 20-city index. Home price appreciation plays a major role in household wealth.
  • Markit’s manufacturing purchasing managers’ index (PMI) remained flat in May yet production contracted for the first time in over six years. The overall reading was weighed down by weak business investment across the energy sector, political uncertainty tied to the upcoming presidential election and the continued muted economic environment. The Institute for Supply Management’s PMI moved slightly higher in May, but also painted a subdued picture of expansion.
  • Initial claims for unemployment benefits decreased by 1,000 to 267,000 in the week ending May 28. This is the third consecutive week of decreased claims, consistent with a continued healthy labor market. Continuing claims rose by 12,000 to 2,172,000 in the week ending May 21.
  • The trade deficit increased by 5.3% in April, as imports grew by 2.1% and exports gained 1.5%. Imports were bolstered by industrial equipment as well as motor vehicles and consumer items, reinforcing the demand strength of businesses and consumers.
  • The European Central Bank (ECB) stood pat on interest rates, but left the prospect of additional economic stimulus on the table if inflation remains below target. The ECB’s corporate-bond purchase program will begin next week in an effort to reduce borrowing costs and encourage banks to lend to businesses and households in order to boost capital and household spending.
  • Eurozone consumer and business confidence rose in May, despite concerns about chronic economic stagnation and Britain’s potential departure from the European Union (to be determined in June).
  • The May reading for China’s official purchasing managers’ index for manufacturing remained in expansion for the third consecutive month. Economists believe the monetary policy easing that took place earlier in 2016 will help China reach its 6.5% growth target this year.

 

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