Fisher Investments recaps the biggest market, political and economic news from last week, including the release of the Conference Board’s US Leading Economic Index (LEI), eurozone industrial production and China’s Q1 2020 GDP reading.
Global markets rose, continuing what appears to be the nascent stages of a “V-shaped” recovery. However, it’s impossible to know if the current trend will continue and it’s unlikely stocks move in a straight line up from here. As we’ve long held, stocks pre-price economic data long before they make their way into headlines. And recent weeks suggest markets may have begun shifting their view from the immediate economic future—which will likely be rocky—to an eventual recovery further out.
In the US, President Trump outlined a three-phase plan for state governors to begin reopening the economy. However, the plan doesn’t provide much clarity and suggests a piecemeal or gradual opening approach that leaves significant discretion to state governors. As was largely expected, March US economic data reports were generally lower. The Leading Economic Index (LEI) decreased 6.7% m/m to 104.2, largely tied to the unemployment claims, stock prices, and new building permit components. Retail sales fell -8.7% m/m. Housing starts fell -22.3% m/m to 1.216 million. Industrial production fell 5.4% y/y and manufacturing production was also negative, falling 6.3% y/y.
In the eurozone, data were light given recent national holidays. Eurozone industrial production fell 0.1% m/m in February. The final March core inflation rate remained largely unchanged at 1.0% y/y, in line with estimates.
In Asia, China posted its first GDP contraction on record, showing its economy shrank 6.8% y/y in Q1 2020. March economic data disappointed, but reflected a marked improvement from February as China’s economy started back up. Exports increased to -6.6% y/y and imports increased to -0.9% y/y. March industrial production was negative, decreasing 1.1% y/y, but were a huge improvement from the -13.5% prior reading. March retail sales fell to -15.8% y/y—missing expectations. In Japan, February retail sales fell to 1.6% y/y, modestly decreasing from the prior reading of 1.7% y/y. February industrial production decreased 5.7% y/y, missing forecasts.
The Week Ahead:
The US, UK, eurozone and Japan release preliminary April Manufacturing and Services Purchasing Managers Index (PMIs) figures. The UK also announces March core inflation and retail sales. Japan also reports March core inflation and trade data.
Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.