Weekly Wrap-Up

Last Week In Markets: Aug 10 - Aug 14 2020

Fisher Investments recaps the biggest market, political and economic news from last week, including UK and eurozone GDP, US, Japanese and Chinese July retail sales figures and Chinese M2 money supply.

Global markets rose amid US political news and mixed economic data releases.

In the US, President Trump signed four executive orders over the weekend aimed at restoring some expiring CARES Act programs. While this prompted some lawmakers from both parties to question the constitutionality of these actions, nothing about the orders strikes us as a make-or-break for stocks in this young bull market. For more, please see our 8/10/2020 commentary, “What Saturday’s Executive Actions Likely Will-and Won’t-Do.” On Tuesday, presumptive Democratic nominee Joe Biden announced the selection of California Senator Kamala Harris as his running mate. While much of the media analysis focuses on Senator Harris’ experience and policy positions, it’s too early to know whether Harris helps Biden among key constituents. In our view, the election results still depend on each campaign’s ability to better mobilize voters in individual states—which will become clearer in the coming months. In terms of economic data, July’s core consumer prices (excluding food and energy) rose 1.6% y/y, ahead of estimates.  July industrial and manufacturing production increased 3.0% m/m and 3.4% m/m, respectively but still fell on a year-over-year basis—albeit at a slower rate than June. July retail sales continued improving, increasing 1.2% m/m and 2.7% y/y, though missing forecasts.

In the eurozone, the second estimate of Q2 2020 GDP fell 12.1% q/q, in-line with analyst expectations. June industrial production rose 9.1% m/m but fell 12.3% y/y. In the UK, the preliminary estimate of Q2 2020 GDP shrank 20.4% q/q, garnering headlines as the reading was the worst since UK records began and among the major nations reporting thus far. However, a deeper look reveals the huge contraction was skewed by a horrible April which masked the nascent rebound in May and June. For more, please see our 8/12/2020 article, “Explaining the UK’s Worst-in-the-World Q2 Contraction.” June industrial and manufacturing production increased 9.3% m/m and 11% m/m, respectively, though fell 12.5% y/y and 14.6% y/y, respectively. Preliminary Q2 trade data were mixed—exports fell 11.3% q/q, much less than estimated, while imports fell 23.4% q/q, in-line with expectations. June’s unemployment rate remained flat at 3.9%, faring better than initial forecasts.

In Japan, July retail sales increased 13.1% m/m though fell 1.3% y/y. July preliminary M2 money supply increased 7.9% y/y and July bank lending rose 6.3% y/y. In China, July retail sales fell 1.1 % y/y, missing estimates. July industrial production rose 4.8 % y/y. The July unemployment rate remained unchanged at 5.7%. July M2 money supply and outstanding yuan loans rose 10.7% and 13.0 y/y, respectively. July headline consumer prices rose 2.7% y/y.

The Week Ahead:

The US and eurozone announce preliminary August Markit Manufacturing and Services Purchasing Manager’s Index (PMI) figures. The US also releases the July Conference Board leading economic indicator details. The eurozone announces the second reading of July consumer prices. The UK posts preliminary August CIPS PMI readings, July core consumer prices and July retail sales. Japan reports preliminary Q2 2020 GDP estimates, the second reading of June industrial production, July trade figures, July consumer prices and preliminary August Markit/JMMA manufacturing PMIs. The Democratic National Convention begins on Monday, August 17.

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.