Fisher Investments recaps the biggest market, political and economic news from last week, including global coronavirus concerns, Brexit updates and the US and Japan Leading Economic Index reports.
Global equities fell amid US impeachment trial proceedings and reports of a new coronavirus emanating from China. A virus that was reportedly first contracted in Wuhan, China has now spread to nearly 10 countries, including two cases in the US. While outbreaks can have significant human costs and fear may cause short-term market volatility, history has shown markets typically move on quickly from infectious disease-related news. For more, please see our 01/21/2020 commentary, “What the History of Pandemics Says About the Wuhan Virus and Stocks.”
Data were light in the US. The Conference Board’s Leading Economic Index (LEI) fell 0.3% m/m in December, slightly below consensus. January flash Markit manufacturing and services Purchasing Managers’ Indexes (PMIs) posted at 51.7 and 53.2, respectively. (Readings above 50 indicate expansion.) President Trump’s impeachment trial garnered plenty of headlines, however given current evidence, we believe it is unlikely the Senate gathers the 67 votes needed to convict and remove the President from office. In our view, impeachment’s biggest impact could be on the 2020 presidential election, but it isn’t clear yet whether impeachment will help or hurt the President’s campaign.
In the eurozone, the flash Markit manufacturing PMI came in ahead of expectations at 47.8, while the services PMI posted at 52.2. UK Markit/CIPS manufacturing and services flash PMIs beat expectations at 49.8 and 52.9, respectively. The Brexit bill cleared UK Parliament and received royal assent on Wednesday. On Friday, the European Council and Commission presidents signed the bill, which will go to an EU Parliamentary vote next week before the January 31 deadline. If approved, the UK will formally leave the EU but remain in a transitionary period until the end of 2020, by which time both parties hope to have a finalized trade deal to reduce disruptions.
Japan’s final November LEI fell 0.2% m/m, slightly missing consensus. January flash Markit manufacturing and services PMIs improved from the previous month to 49.3 and 51.1, respectively. November industrial production declined 1.0% m/m, while December core-core consumer prices (excluding energy and food) rose 0.5% y/y. Preliminary export and import values both missed estimates, falling 6.3% y/y and 4.9% y/y, respectively.
The Week Ahead:
The US releases its preliminary Q4 2019 GDP estimate and December new home sales. The eurozone posts preliminary Q4 2019 GDP. Japan announces December housing starts, preliminary industrial production and retail sales. China reports the December official manufacturing and non-manufacturing PMIs.
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.