Global equities fell 0.3% amid positive economic data and continued Q1 2018 earnings reports.
US economic data were mostly positive. The April Markit manufacturing and services Purchasing Managers’ Indexes (PMIs) came in at 56.5 and 54.6, respectively, both in line with expectations and signaling economic expansion. The April ISM manufacturing and non-manufacturing PMIs fell to 57.3 and 56.8, respectively—both missing estimates, however, still indicating growth. March exports rose 9.2% y/y, ahead of estimates, and imports rose 9.7% y/y, slightly less than expected. April nonfarm payrolls increased by 164,000 while the unemployment rate fell to 3.9%—the lowest rate in 17 years. As expected, the Fed held interest rates steady. As of Thursday, over 75% of S&P 500 companies have reported Q1 2018 earnings: Revenue growth has averaged 8.4% y/y and earnings growth has averaged 24.1% y/y.
Eurozone economic data were positive. The first estimate of Q1 2018 GDP was reported at 2.5% y/y, in line with expectations and the 20th consecutive quarter of growth. The Markit manufacturing and services PMIs reported expansion in April with readings of 56.2 and 54.7, respectively. March eurozone household lending increased 3.0% y/y, slightly beating expectations while March retail sales rose 0.8% y/y, below expectations. The March unemployment rate remained at 8.5%, as expected. In the UK, the April Markit/CIPS manufacturing and services PMIs came in at 53.9 and 52.8, respectively—both missing expectations but still indicating growth. In Italy, the fourth attempt by major parties to form a coalition government failed—leaving Italy without a ruling government since the March 4 election. While this might extend uncertainty in the near term, Italy has dealt with political uncertainty for years and the likely outcome is gridlocked government—a positive for markets.
In Asia, China’s official April manufacturing and services PMI surveys, including large, state-owned firms, rose to 51.4 and 54.8, respectively. The April Markit/Caixin manufacturing and services PMIs—which include smaller businesses—came in at 51.1 and 52.9, respectively. Japan’s April Nikkei manufacturing and services PMIs beat expectations, rising to 53.8 and 52.5, respectively.
The US and China report April inflation figures. The UK releases March industrial and manufacturing production. The UK and China report March and April trade data, respectively. Japan announces April bank lending. The Bank of England meets to set monetary policy.
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.