Global equities ended -0.2% lower as markets digested central bank activity.
As expected, the Federal Reserve raised the benchmark rate by 25 basis points. The 10-year US Treasury bond yield continued to grind higher as the Fed signaled further rate hikes are likely in 2017. Despite the recent rise in US yields, we believe investor concern over measured rate hikes remains misplaced. Elsewhere, the Bank of England and the Swiss National Bank kept their respective policy rates unchanged, while the Bank of Mexico raised its benchmark rate by 50 basis points.
US economic data showed modest growth. November retail sales grew 0.1% m/m on slower than expected auto sales. Inflation remained tame as core consumer prices rose 2.1% y/y and core producer prices rose 1.6% y/y—in line with forecasts. November industrial production fell 0.4% m/m and housing data weakened as housing starts and permits missed expectations. Finally, weekly initial jobless claims fell and remain near multi-decade lows.
European data were more robust. Eurozone October industrial production grew 0.6% y/y. Stronger than expected manufacturing output buoyed December’s Purchasing Manager Index (PMI) composite to 53.9. (A reading above 50.0 signals growth.) Eurozone inflation met expectations, rising 0.6% y/y to multi-year highs. UK data were broadly positive. UK November core retail sales grew 0.5% from the previous month, beating estimates. The October unemployment rate remained at cycle lows. Inflation grew just 1.4% y/y in November.
In Asia, China released key November economic data. Industrial production accelerated to 6.2% y/y and retail sales grew 10.8% y/y, each ahead of estimates. Broader money supply grew 11.4% y/y and fixed investment grew 8.3% y/y, both in-line with expectations and indicative of a stable Chinese economy.
Economic releases are light ahead of the Christmas holiday. The US announces durable goods orders, home sales, personal income, and the November leading economic index. The Bank of Japan makes a rate announcement. No significant releases are expected from the eurozone, the UK, or China.
—The Investment Policy Committee
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.