Fisher Investments recaps the biggest market, political and economic news from last week, including US Services Purchasing Managers’ Index (PMI) readings, eurozone retail sales, UK fiscal stimulus measures and Japan’s Leading Economic Index (LEI) figure.
Global markets rose amid sparse economic data releases. Global stocks have experienced a V-shaped recovery since the market low on March 23. We believe stocks’ rise likely marks the beginning of a new bull market. Looking ahead, a sustained climb with periodic volatility seems much more likely than another steep downturn in our view. However, we are monitoring developments closely and will not hesitate to act if our outlook changes.
In the US, data releases were positive. The final June Markit Services Purchasing Managers’ Index (PMI) was revised higher to 47.9, modestly surpassing forecasts and rising significantly from May’s 37.5 reading. The ISM Non-Manufacturing PMI for June rose to 57.1 from 45.4 in May, handily beating estimates. Readings over 50 indicate expansion. The Job Openings and Labor Turnover Survey (JOLTS) revealed hiring surged to a record 6.5 million in May. While such jobs data are backward-looking, they help reinforce that as businesses are allowed to reopen, hiring can pick back up faster than many expected. Renewed lockdowns in response to rising COVID-19 case counts could slow or reverse this progress, but for now, state governments don’t appear to be responding with the same scale or severity of initial shutdowns.
In the eurozone, May retail sales fell 5.1% y/y but rose 17.8% m/m—both better than expected. In the UK, the June Markit/CIPS Construction PMI came in at 55.3, nearly doubling the prior reading of 28.9. The UK government announced an additional £30 billion in fiscal stimulus, including tax cuts, employee retention incentives for companies and infrastructure spending—a move largely expected by markets. Similar to fiscal policies in other countries, these measures can temporarily help individuals and businesses—and even boost sentiment some—but they likely won’t have a huge economic impact.
For Japan, the Conference Board’s May Leading Economic Index decreased 1.4% m/m. June money supply (M2) increased 7.2% y/y and bank lending rose 6.2% y/y—both surpassing expectations. May household spending sank 16.2% y/y, worse than forecast and evidence of COVID-driven lockdowns’ severe toll. In China, June consumer prices rose 2.4% y/y, below analyst estimates and falling slightly from the previous reading. June money supply (M2) increased 11.1% y/y, in line with expectations.
The Week Ahead:
The US, UK, and eurozone release June inflation data. The eurozone, UK, China and Japan release May industrial production figures. The US also reports June industrial production and retail sales figures. The UK posts May manufacturing production data. China releases Q2 GDP, June trade figures and retail sales. Japan announces May retail sales figures.
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.