Weekly Wrap-Up

Last Week In Markets: Apr 27 - May 01, 2020

Fisher Investments recaps the biggest market, political and economic news from last week, including US and eurozone GDP growth figures, Chinese Purchasing Managers Index (PMI) readings, and Japanese core consumer price data.

In the US, the first estimate of Q1 2020 GDP showed the economy contracted 4.8% annualized. While a contraction in GDP was widely expected, this report still doesn’t give us a great look at COVID-19’s impact. Perhaps more importantly for investors, markets are a leading indicator and move on the gap between expectations and reality—rather than on backwards-looking data. What matters most from here is how expectations evolve and whether or not they are too optimistic. For more, see our 4/30 commentary, “Q1 GDP More Hint Than Revelation.” In other economic news, new weekly jobless claims declined from previous weeks but remained elevated, with 3.8 million filing for unemployment in the week ending April 25. The Fed left short-term interest rates unchanged at 0%-0.25% during their scheduled policy meeting.

The first estimate of eurozone Q1 2020 GDP showed a decline of 3.8% q/q, below expectations (for comparison’s sake, the US Q1 GDP contraction was 1.2% when measured q/q). In April, flash consumer prices increased 0.4% y/y and flash core consumer prices (excluding food and energy) increased 0.9% y/y—both higher than expected. March eurozone unemployment ticked up to 7.4%—better than expectations of 7.7%. The European Central Bank left short-term interest rates unchanged at 0%. In the UK, data were light. April’s final Markit manufacturing Purchasing Managers’ Index (PMI) was revised to 32.6—down from the initial estimate of 32.9 (readings below 50 indicate contraction).

In Japan, March unemployment modestly increased to 2.5%, in line with estimates. Preliminary retail sales fell 4.6% y/y in March, missing estimates. March preliminary industrial production declined 3.7% m/m, faring better than analyst forecasts. The Bank of Japan kept short-term interest rates unchanged at -0.1% while announcing expanded purchases of government debt, corporate debt and equities. In China, the April Caixin manufacturing PMI fell to 49.4, missing estimates.

The Week Ahead:

The US announces April unemployment figures. The UK reports the final April Markit services PMI, and the Bank of England meets to set monetary policy. China releases April trade data and Caixin services PMI numbers.

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.