The second quarter got off to a volatile start as global equities seesawed amid ongoing trade war fears and mixed economic news. The US and China exchanged escalating tariff threats throughout the week. However, headline rhetoric does not constitute a trade war and can easily be a negotiating tactic. In our view, these tariffs, even if implemented, lack the scale needed to wallop the $80 trillion global economy and drive stocks into a bear market. Likewise, while we believe tariffs are misguided, in today’s globalized economy goods and services are more interchangeable and capital flows across borders freely—mitigating tariffs’ negative impact. For more, please see our 04/06/2018 commentary, “To Weigh the US – China Trade Tiff, Avoid Extrapolation.”
In terms of US economic data, the March ISM and Markit Purchasing Managers’ Indexes (PMIs)—forward looking indicators of economic growth—slowed but still indicated expansion. February factory orders increased 1.2% m/m. February imports and exports each rose 1.7% m/m. March nonfarm payrolls increased by 103,000, missing expectations, while the unemployment rate remained at 4.1%.
Eurozone March Markit manufacturing and services PMIs came in at 56.6 and 54.9, respectively, in line with expectations and indicating expansion. February eurozone retail sales rose 1.8% y/y, below forecasts. The February unemployment rate fell to 8.5%, as expected. In the UK, the March Markit/CIPS manufacturing PMI beat expectations, rising to 55.1. However, the services PMI fell to 51.7 as severe weather early in the month impacted employee-heavy services, consumer spending and construction activity.
In Asia, China’s official March manufacturing and non-manufacturing PMI surveys, including large, state-owned firms, rose to 51.5 and 54.6, respectively. The March Markit/Caixin manufacturing and services PMIs, which includes smaller businesses, came in at 51.0 and 52.3, respectively. In Japan, the March Nikkei manufacturing and services PMIs fell to 50.9 and 53.1, respectively. The February unemployment rate rose slightly to 2.5%, but was still below forecasts for 2.6%.
The US announces March inflation data. The eurozone and UK report February industrial production and trade figures. The UK also releases February manufacturing production numbers. China posts March inflation and trade data, while Japan reports March bank lending.
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 a Luxembourg tax basis. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.