Weekly Wrap-Up

Last Week In Markets: Aug 03 - Aug 07 2020

Fisher Investments recaps the biggest market, political and economic news from last week, including US, UK, eurozone, Chinese and Japanese July Purchasing Managers Index (PMI) reading, US unemployment data and Japanese June Leading Economic Index (LEI) details.

Global markets rose amid peak earnings season. To date, 89% of S&P 500 companies have reported Q2 2020 results and the blended earnings decline currently stands at -33.8% y/y. Despite the dismal headline figure, 83% of companies have beat earnings estimates so far. Additionally, similar to GDP, by the time earnings numbers come out they are typically old news to stocks—which are already looking further into the future.

In the US, the final July Markit Services Purchasing Managers’ Index (PMI) rose to 50.0 from 47.9 in June, beating initial estimates. The final July Markit Manufacturing PMI rose to 50.9 from 49.8 in June, missing expectations. Readings above 50 indicate expansion and July’s PMIs are at or above this threshold for the first time since January. The July unemployment rate fell to 10.2% from 11.1% in June, beating forecasts. There is still a long way to go for employment to reach February levels and progress to that end will likely be uneven. However, high unemployment and slow job growth don’t hold back new bull markets—stocks typically move ahead of business hiring and the broader economy. For more, please see our 8/7/2020 commentary, “A Two-Pronged Note on Today’s Jobs Report.”

In the eurozone, the final July Markit Manufacturing PMI increased to 51.8, beating initial estimates. The final July Markit Services PMI increased to 54.7, less than expected. June retail sales increased 5.7% m/m and 1.3% y/y. The UK’s final July Markit/CIPS Manufacturing and Services PMIs rose to 53.3 and 56.5, respectively—both missing expectations. Meanwhile, the Bank of England left monetary policy unchanged.

Japan’s final July Jibun Bank Manufacturing and Services PMIs rose to 45.2 and 45.4, respectively. The Conference Board’s preliminary June Leading Economic Index (LEI) for Japan decreased 0.5% m/m. In China, the July Caixin Manufacturing PMI rose to 52.8 while the July Services PMI fell to 54.1. July exports rose 7.2% y/y while imports fell 1.4% y/y. The positive exports figure, while encouraging overall, reflects surging exports to the US—strongly suggesting businesses were trying to front-run their collective fears of potential new tariffs between the US and China. As a result, July’s surge likely pulled forward late-summer and early-autumn demand. For more, please see our 8/7/2020 commentary “A Word on China's Gangbusters July Exports."

The Week Ahead:

The eurozone and UK report June industrial production while the US and China release July industrial production. Japan, China and the US release July retail sales. The US and China report July inflation. The UK and eurozone provide the first and second estimates of their respective Q2 2020 GDP. China also reports July money supply.

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.