Global stocks ended the week -0.1% lower. US economic data were largely positive. Services and manufacturing components of the economy continued to reflect expansion. The June ISM non-manufacturing Purchasing Managers’ Index (PMI) accelerated to 57.4, ahead of the 56.5 estimate. June manufacturing PMI jumped to 57.8, beating the 55.2 forecast. Additionally, June manufacturing and non-manufacturing new orders accelerated to 63.5 and 60.5, respectively. May exports increased 0.4% m/m, while imports dipped 0.1% m/m. June nonfarm payrolls surged 222,000, handily beating expectations. However, the June unemployment rate rose slightly to 4.4% as the labor force participation rate edged up. The Federal Reserve released minutes from its June meeting, revealing few surprises and interest rates changed little after the release.
European economic data continued to indicate positive momentum. The June eurozone Markit manufacturing PMI rose to 57.4, a six-year high, while the services PMI showed continued strength at 55.4. May eurozone retail sales rose 2.6% y/y, in-line with forecasts. May eurozone unemployment held steady at an eight-year low of 9.3%, but missed estimates for a slight decrease. May industrial production in Germany (1.2% m/m) and France (1.9% m/m) beat expectations. In the UK, output data disappointed. May manufacturing production fell 0.2% m/m and the wider measure of May industrial production fell 0.1% m/m.
On the political front, the European Union (EU) and Japan agreed in principle to the completion of a free trade agreement reducing tariffs on 99% of traded goods. Many of the deal’s provisions will be phased in over the next several years. Removing trade barriers between two of the world’s largest economies is a long-term positive and demonstrates protectionist policy isn’t becoming the norm. The agreement is expected to be completed by the end of the year, but still needs to be ratified by the Japanese and EU national governments.
In Asia, Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) was trounced in local Tokyo elections, likely further hindering his effectiveness. China’s May Caixin manufacturing PMI rebounded to 50.4, beating estimates for 49.8. China implemented another incremental financial reform by allowing overseas investors to trade domestic Chinese bonds on the Hong Kong exchange. The reform is the third such linkage between Hong Kong and Chinese domestic capital markets and continues the country’s gradual financial system liberalization.
The US reports June consumer prices, retail sales and industrial production. The UK posts May unemployment. Germany, France and Italy report June inflation figures. China releases June inflation, loan growth and trade 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.