Fisher Investments recaps the biggest market, political and economic news from last week, including US GDP, the Department of Justice’s recent antitrust review and the European Central Bank monetary policy meeting.
Global equities rose amid mixed economic reports. The first estimate of Q2 2019 GDP growth was reported up 2.1% q/q annualized, beating expectations although slowing from the prior quarter. The July Markit services Flash Purchasing Managers’ Index (PMI) beat expectations at 52.2, while the manufacturing Flash PMI missed expectations at 50.0 (readings above 50 indicate expansion). Preliminary June durable goods orders grew 2.0% m/m, beating forecasts. New home sales totaled 646,000 in June, missing the consensus estimate. Early in the week, the Department of Justice announced an antitrust review of big Tech and Tech-like companies. While we are watching these developments closely, we believe new sweeping sector-wide legislation or regulation appears unlikely. The most likely outcome is more fines that, despite some likely head turning figures, pale in comparison to the targeted companies’ balance sheets. Technology fears are nothing new and have been recycled many times during the current bull market in various forms—sapping negative surprise power.
In the eurozone, lending data were broadly positive. July loan growth rose 3.3%, slightly more than expected. June broad money supply (M3) grew 4.5% y/y, although slightly less than expected. In other eurozone data, the July Markit services Flash PMI was reported at 53.3, while the manufacturing Flash PMI was 46.4. The European Central Bank met this week, leaving monetary policy unchanged. In the UK, Boris Johnson—former Foreign Secretary and London mayor—won the UK Conservative Party’s leadership contest, replacing Theresa May as Prime Minister. While this sheds a little light on the cast of characters in Brexit’s next act, it adds scant clarity beyond that. How the UK/EU relationship will look post-Brexit remains unknowable. For more, please see our 07/23/2019 commentary, “Brexit’s Next Act Has Its Cast, but the Script Is Still Missing.”
In Japan, the July Markit manufacturing PMI was 49.6, indicating contraction but up slightly from the prior month. The Conference Board’s May Leading Economic Index (LEI) came in at 94.9, missing expectations.
The Week Ahead:
The US and China meet for trade talks. We would not be surprised to see heighted trade war rhetoric before and after the talks. The US reports final July Markit manufacturing PMI and July unemployment figures. The eurozone announces July inflation, preliminary Q2 2019 GDP, June retail sales and June unemployment numbers. The UK releases July CIPS manufacturing PMI data. Japan releases June industrial production, imports and Markit manufacturing PMI data, while China reports July manufacturing and non-manufacturing PMIs. The Fed, Bank of Japan and Bank of England each meet to set their respective monetary policies.
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.