Weekly Wrap-Up

Last Week In Markets: Aug 21 - Aug 25, 2017

Fisher Investments recaps the biggest market, political and economic news from last week, including Fed Chair Janet Yellen’s central bank symposium comments, as well as US, European, Japanese and Emerging Market economic releases.

Global equities rose amid light economic data.

In the US, July new home sales fell to a 571,000 seasonally adjusted annual rate, missing expectations. However, an upward revision to June’s sales and weakness in expensive locations account for much of July’s miss. Similarly, while July durable goods orders fell 6.8% m/m, this was due primarily to a reversal in aircraft orders, which surged at June’s Paris Air Show. Core capital goods orders, which exclude transportation and defense, rose 0.4% m/m. At the annual central bank symposium in Jackson Hole, Fed Chair Janet Yellen defended financial regulatory reforms enacted since 2008’s financial panic. Though her remarks drew headlines, considering her current term ends February 2018 and it is up to Congress and the White House to decide Dodd-Frank’s fate, we don’t believe her comments are a bellwether.

UK and eurozone economic data were positive. UK Q2 2017 GDP expanded 0.3% q/q, meeting expectations, but most media focused on weak, 0.1% q/q household consumption growth. Yet trade suggests this may understate consumers’ health: Exports and imports each rose 0.7% q/q (0.4% for goods imports, 1.8% for services), suggesting sound domestic demand. Meanwhile, the UK government published papers outlining its starting position for Brexit negotiations, stating its desire to maintain present customs arrangements with the remaining EU nations. While not official policy, the publications reflect what we’ve long held—the Brexit process will be long, deliberate and public, helping sap surprise power. In Germany, the second estimate of Q2 2017 GDP met expectations, expanding 0.6% q/q. Similarly, Spanish Q2 GDP expanded 0.9% q/q, meeting consensus.

July’s Japanese National Consumer Price Index (CPI) rose 0.4% y/y, above expectations. So-called core-core CPI, which excludes food and energy, fell 0.1% y/y, missing expectations for a small rise. Both measures remain well below the Bank of Japan’s 2.0% inflation target.

In Emerging Markets, Mexico reported its 16th consecutive quarter of economic growth, as GDP expanded 0.6% q/q. Brazil unexpectedly proposed privatizing its largest utility—an attempt to meet budget deficit targets without cutting spending.

The Week Ahead:

US economic releases include the second estimate of Q2 GDP, manufacturing Purchasing Managers’ Indexes (PMIs) and employment data. In Europe, the eurozone reports July money supply and both eurozone and UK manufacturing PMIs. Japan reports trade balance and unemployment figures. Chinese manufacturing and services PMIs are due.

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.