Weekly Wrap-Up

Last Week In Markets: Apr 23 - 27, 2018

Fisher Investments recaps the biggest market, political and economic news from last week, including North and South Korean political developments, US and European economic releases and Japanese central bank announcements.

Global stocks fell 0.1% amid positive economic data and central bank announcements. After meeting on Friday, North and South Korea’s leaders agreed to pursue a peace deal. However, it’s too early to draw conclusions and markets were largely unchanged after the announcement.

US economic data were positive. The first estimate of Q1 2018 GDP was reported at 2.3% annualized, surpassing the 2.0% forecast. The corporate earnings season continued this week. A little more than half of S&P 500 companies have reported results with about 80% exceeding consensus earnings per share estimates—above the 74% average of companies that beat earnings estimates over the last four quarters. April Markit manufacturing and services Flash Purchasing Managers’ Indexes (PMIs) indicated expansion, both rising above expectations. March durable goods orders rose 2.6% m/m, ahead of expectations. The 10-year Treasury yield rose above 3%, albeit temporarily, for the first time since January 2014—prompting a number of headlines searching for meaning. However, we believe this is an arbitrary threshold that doesn’t indicate the future direction of interest rates. In a world where economic growth, inflation, lending and money supply growth are all moderate it is difficult to envision rates soaring from here.

European economic reports were mostly positive. April eurozone Markit manufacturing Flash PMI came in at 56.0, slightly missing expectations, while the services Flash PMI rose ahead of expectations to 55.0. Both readings indicate economic expansion ahead. The European Central Bank left monetary policy unchanged, as expected. The first estimate of UK Q1 2018 GDP was 1.2% y/y, slightly below forecasts but representing the 21st consecutive quarter of GDP growth.

Japan’s April Nikkei manufacturing Flash PMI increased to 53.3. March retail sales rose 1.0 y/y, below estimates. The March unemployment rate remained at 2.5%. The Bank of Japan (BoJ) left monetary policy unchanged. However, BoJ Governor Haruhiko Kuroda announced the bank will no longer reference a timeframe for achieving its 2% inflation goal, claiming the target date—most recently set for 2020—was counterproductive.

The Week Ahead:

The US, UK, eurozone, China and Japan release final April manufacturing and services PMIs. The US also announces April nonfarm payrolls and March trade and unemployment data. The eurozone reports its first estimate of Q1 2018 GDP and March loan growth, retail sales and unemployment.

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.