Fisher Investments recaps the biggest market, political and economic news from last week, including the US’s first Q4 GDP estimate, Eurozone money supply, UK unemployment and Japan’s Leading Economic Index.
In the US, the first estimate of Q4 2020 GDP growth was 4.0% annualized—in line with forecasts. The Fed left its target federal funds rate and asset purchases unchanged. December durable goods orders rose 0.2% m/m, less than expected. New home sales increased 1.6% m/m in December, slightly less than estimates. President Joe Biden has issued a flurry of Executive Orders since his inauguration last week. In particular, the cancellation of the Keystone XL pipeline and new rules making it harder to drill on federal lands have caught investors’ eyes. However, in our view, these developments don’t alter Energy sector fundamentals. Executive Orders typically have less market-moving power than media attention suggest. For more, please see our January 28 commentary, “What the Latest Executive Orders Do—and Don’t—Mean for US Oil Production.”
In the eurozone, data were light. Money supply (M3) rose 12.3% y/y in December, ahead of estimates. On Tuesday, Italian Prime Minister Giuseppe Conte resigned following a breakdown in the four-party coalition government he has led since September 2019. We believe the most likely outcome is for the previous coalition partners (or perhaps a slightly reshuffled coalition) to negotiate another government led by Conte or a new prime minister. However this plays out, the reality of a very gridlocked, internally fractured Italian government probably won’t change. This should keep legislative risk low and is an underappreciated positive for stocks in our view. In the UK, the unemployment rate for the three months ending in November was 5.0%, slightly better than expected.
For Japan, the Conference Board’s Leading Economic Index (LEI) increased 2.2% m/m in November. December retail sales fell 0.3% y/y, slightly less than expected. December preliminary industrial production decreased 1.6% m/m and 3.2% y/y. The unemployment rate remained unchanged at 2.9% in December.
The Week Ahead:
January Purchasing Managers’ Indexes for the US, eurozone, UK, Japan and China are announced. The US releases January unemployment and December trade data. The eurozone reports its first estimate of Q4 2020 GDP, December unemployment and December retail sales. The UK announces December money supply and the Bank of England meets to set monetary policy. Japan reports preliminary December LEI.
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.