Global equities ended 4.1% higher, shrugging off central banker chatter, Italian referendum results, and the impeachment of South Korea's president, while embracing improved economic data and post-US election sentiment.
US economic releases broadly beat expectations. The ISM's November composite Purchasing Manager's Index (PMI) rose to 57.2—the highest this year—as stronger business activity, robust new orders and solid export orders exceeded forecasts. October factory orders increased 2.7% m/m to the strongest levels of the year. October durable goods orders increased 4.6% m/m. October US trade data saw a widening deficit as surging US imports eclipsed modestly falling exports. Imports rose on increased business investment and consumer product demand due to the holiday season. The US labor market tightened, with rising wages and increased productivity.
UK data were mixed yet sparse, pausing from the spate of robust post-Brexit releases. October industrial production fell 1.1% y/y and manufacturing production fell 0.4% y/y, both modestly missing forecasts. However, October construction output rose 0.7% y/y, beating expectations. UK's composite PMI rose faster than forecast to an expansionary reading of 55.2.
Italian Prime Minister Matteo Renzi announced his resignation following Sunday’s referendum on political reform, in which Italian voters chose to maintain the status quo. Markets mostly shrugged as the outcome was widely expected. The European Central Bank (ECB) left interest rates unchanged at zero and extended the length of its bond buying program, but slowed the pace of bond purchase to €60 billion per month. Eurozone economic data were positive. October retail sales increased 2.4% y/y. Germany's October factory orders grew 4.9% m/m, sharply beating the 0.6% m/m forecast.
Chinese November exports and imports exceeded expectations, rising 0.1% y/y and 6.7% y/y respectively—the first positive reading for both since late 2014. Imports rose as domestic infrastructure and housing drove demand, while improved trade with the US, Japan and eurozone drove outsized export gains. Similarly, November consumer and producer price indexes rose faster than forecast. Japan's initial Q3 GDP estimate was revised meaningfully lower (from 2.3% y/y to 1.3% y/y) as inventories and business investment proved worse than initially reported. Australia surprised with a negative Q3 GDP release, though weakness was related to weather.
The Week Ahead:
The eurozone releases consumer prices and industrial production data. The UK reports consumer prices and retail sales. The US releases consumer prices, producer prices, retail sales and industrial production data. China releases industrial production, retail sales and fixed asset investment results. Lastly, Japan releases October machinery data.
—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.