Fisher Investments recaps the biggest market, political and economic news from last week, including concerns about US-Chinese trade tensions, Markit Purchasing Manager’s Indexes and UK GDP.
Global equities fell amid continued trade tensions between the US and China. In the US, the final July Markit Services Purchasing Managers’ Index (PMI) rose to 53.0 from 51.5 in June, beating initial estimates of 52.2 (readings above 50 indicate expansion). The July ISM Non-Manufacturing PMI fell to 53.7, missing expectations. US stocks fell sharply on Monday as the People’s Bank of China allowed the yuan to fall to its lowest level since the financial crisis—sparking concerns China may be “weaponizing” the yuan against the US in response to continued trade tensions. However, we think these fears are largely overwrought considering China’s intervention in recent years has been to support the yuan, not weaken it, and since China has an incentive to maintain a stable currency which is vital for continued economic growth. For more, please see our 08/05/2019 commentary, “On Monday’s Volatility and the Yuan.”
In the eurozone, the final July Markit Composite PMI remained unchanged at 51.5, while the Markit Services PMI fell to 53.2, narrowly missing estimates. In the UK, July Markit/CIPS Services PMI rose to 51.4. The UK announced slightly slower than expected Q2 2019 GDP growth of 1.2% y/y and falling June imports and exports of -12.9% q/q and -3.3% q/q, respectively. June industrial and manufacturing production missed expectations, decreasing -0.6% y/y and -1.4% y/y, respectively.
In Asia, Japan announced annualized Q2 2019 GDP growth of 1.8%, surpassing consensus. The preliminary June Leading Economic Index (LEI) decreased to 93.3 from 94.9 in May. July bank lending increased 2.3% y/y. In China, July exports grew 3.3% y/y while imports decreased -5.6% y/y, both beating estimates. July consumer prices rose 2.8% y/y and the Caixin Services PMI rose to 51.6.
The Week Ahead:
The US reports July core consumer prices as well as industrial and manufacturing production data. The eurozone releases the second reading of Q2 2019 GDP, July core consumer prices, June trade figures and industrial production data. The UK posts July core consumer prices and retail sales. China reports July industrial output and retail sales. Japan announces June retail sales and industrial production.
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.