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06/22/2016
Market Update

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The U.S. Federal Reserve held interest rates steady this week and lowered its projections on future hikes for the next two years, citing insufficient economic growth as the reason for a more conservative course of action. Following a six-day slump, oil prices jumped on Friday as the U.S. dollar weakened slightly, but still ended the week with a loss. Anxious investors directed their attention to the upcoming Brexit vote (which will decide whether the U.K. will remain in the European Union), scheduled for June 23.
This Week
  • The U.S. Federal Reserve held interest rates steady this week and lowered its projections on future hikes for the next two years, citing insufficient economic growth as the reason for a more conservative course of action. Following a six-day slump, oil prices jumped on Friday as the U.S. dollar weakened slightly, but still ended the week with a loss. Anxious investors directed their attention to the upcoming Brexit vote (which will decide whether the U.K. will remain in the European Union), scheduled for June 23.
  • Consumer prices increased by 0.2% in May, marking the third consecutive monthly advance. Rising gasoline prices and rents offset reduced grocery prices during the month and supported higher inflation.
  • U.S. retail sales grew by 0.5% in May, led by online purchases and gas-station spending. Freer spending points to expanding consumer confidence in the economy, despite May’s shaky jobs report.
  • May’s 1.4% increase in import prices, the largest in over four years, suggests that inflation is on the rise as a result of climbing oil prices and a weak dollar. Export prices also grew by 1.1% in the month, for the largest gain in five years.
  • Producer prices exceeded expectations and advanced by 0.4% in May, mostly due to rising energy prices.
  • Industrial production dropped by 0.4% in May, slightly worse than anticipated. Reduced auto factory and electric utilities activity accounted for the decrease.
  • Initial jobless claims rose by 13,000 to 277,000 for the week ending June 11, marking the first increase in over a month. Despite the higher reading, the number of initial claims remains at a level consistent with employment growth. Continuing claims also advanced by 45,000 to 2,157,000 for the week ending June 4.
  • The June housing market index of the National Association of Home Builders continued to show improvement, logging its highest reading since January, a sign of optimism among home builders. Historically low interest rates and steady employment have boosted builder confidence.
  • Industrial output in the eurozone advanced for the first time in three months during April, suggesting that its recovery continues in spite of weaker demand for exports from large developing economies. Consumer goods led the growth, driven by increased household spending. Meanwhile, wage growth in the region rebounded during the first quarter, but not by enough to boost inflation.
  • The Bank of England’s Monetary Policy Committee members agreed unanimously to hold the benchmark interest rate steady in anticipation of next week’s Brexit referendum, which will determine whether the U.K. continues its membership in the European Union. Polls showed a tight race in the vote.
  • As expected, the Bank of Japan (BOJ) kept its negative interest rate policy in place and did not dismiss the possibility of enacting further monetary easing, saying it would take additional steps if necessary to achieve price stability. The BOJ also acknowledged that inflation expectations have waned.

 

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