Weekly Wrap-Up

Last Week In Markets: Aug 19 - Aug 23, 2019

Fisher Investments recaps the biggest market, political and economic news from last week, including US-China tariff disputes, Italian political news and Japanese trade data.

Global equities fell again this week amid ongoing trade tensions between the US and China. In the US, August Markit flash services and manufacturing Purchasing Managers’ Indexes (PMIs) fell to 50.9 and 49.9 respectively, both below expectations (readings above 50 indicate expansion). While manufacturing indicated a slight contraction, services continued to indicate expansion and represent a much larger portion of the US economy. (For more, see our 08/23/2019 MarketMinder article, “Quick Hit: About the US Manufacturing PMI’s Contraction”) The Conference Board’s Leading Economic Index rose 0.5% m/m in July, surpassing estimates. Recall, a rising LEI trend has never been followed by a recession in modern market history. On Friday, China announced additional tariffs on $75bn of US goods, scheduled to take effect on September 1. Despite the increase, which now encompasses all goods traded between the two countries, we still believe the aggregate impact lack the scale to derail the global bull market.

Eurozone August Markit flash services and manufacturing PMIs increased to 53.4 and 47.0 respectively, both slightly ahead of forecasts. Core consumer prices (excluding more volatile goods like food and energy) rose 0.9% y/y in July, in line with estimates and decelerating slightly from June. In Italy, Prime Minister Giuseppe Conte resigned Tuesday after Italy’s co-ruling right wing party, The League, ended the current coalition with the Five Star Movement. Italy’s President, Sergio Mattarella, can now call on party leaders to try to form a caretaker government. If this fails, snap elections will be held, but for now gridlock prevails—a familiar result for Italy. For additional analysis please see our 08/20/2019 MarketMinder article, “Italy’s Coalition is Kaput.

In Japan, core-core consumer prices (excluding more volatile goods like food and energy) increased 0.6% in July, a slight uptick from the previous month. July imports and exports fell 1.2% y/y and 1.6% y/y respectively, both better than expected. The August Markit flash manufacturing and services PMIs rose to 49.5 and 53.4, respectively.

The Week Ahead:

The US releases include manufacturing and services Purchasing Managers’ Indexes. In the eurozone, July manufacturing and services Purchasing Managers’ Indexes and core consumer prices are expected. Japan releases core inflation figures and manufacturing Purchasing Managers’ Index data.

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.