Weekly Wrap-Up

Last Week In Markets: Dec 4 - Dec 8, 2017

Fisher Investments recaps the biggest market, political and economic news from last week, including US political updates, European economic data and Brexit negotiations, Chinese import and export values and Japan’s GDP revision.

Global stocks ended the week slightly higher. Senate Republicans passed their version of a tax reform bill last weekend. Now, party leaders will try to reconcile differences between the Senate and House bills. While it’s too early to know what a final bill looks like, or if one even makes its way to the president’s desk, history shows tax changes lack predetermined economic or market impact. (For more, see our 11/06/2017 MarketMinder commentary, “Don’t Let the House’s Tax Plan Tax Your Nerves”) On Thursday, Congress passed a temporary spending bill to avoid a partial government shutdown. Congress now has until December 22 to pass a new spending bill or face another government shutdown. However, even if a shutdown does happen, they are historically short-lived and have never caused a bear market or recession. (For more, see our 12/07/2017 MarketMinder commentary, “A Week Without Washington Wouldn’t Wreck Stocks”) On the economic front, US data were mixed. The Markit services PMI and the ISM non-manufacturing PMI fell to 54.5 and 57.4, respectively, but both remained in expansion. October factory orders fell 0.1% m/m. November non-farm payrolls increased by 228,000 m/m, beating expectations, while the November unemployment rate remained at 4.1%.

In the eurozone, the third estimate of Q3 2017 GDP was revised up to 2.6% y/y from 2.5%. October eurozone retail sales fell 1.1% m/m, but rose 0.4% y/y. The November Markit composite PMI posted at 57.5, in line with the consensus. October German manufacturing orders grew 6.9% y/y—more than expected, while industrial production increased 2.7% y/y. (For more, see our 12/07/2017 MarketMinder commentary, “Eurozoom!”) In the UK, November construction and services PMIs both indicated expansion at 53.1 and 53.8, respectively. November retail sales rose 1.5% y/y. October industrial and manufacturing production rose 3.6% y/y and 3.9%, respectively. The first round of Brexit negotiations concluded on Friday, settling issues such as the UK’s exit fee and the Irish border. However, the conclusion of this first phase of negotiations now opens the door to the more contentious trade talks, which most expect to take a year or more to settle. (For more, see our 12/08/2017 MarketMinder commentary, “Seeing Through Politicians’ Spin on Brexit Phase One”)

In Asia, November Chinese import and export values surpassed expectations. In Japan, the second estimate of Q3 GDP was revised up to 2.1% y/y from 1.7%. November bank loans grew 2.7% y/y, slightly lower than expected. The November Nikkei services PMI met expectations at 51.2 and remained in expansion.

The Week Ahead:

The Fed, European Central Bank and Bank of England hold meetings to set their respective monetary policies. The US releases November retail sales and inflation data. The eurozone announces October industrial production and trade figures. The UK releases November inflation and retail sale data. China announces November retail sales 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 a Luxembourg tax basis. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.