Weekly Wrap-Up

Last Week In Markets: July 30 - Aug 3, 2018

Fisher Investments recaps the biggest market, political and economic news from last week, including central bank announcements and US-China trade rhetoric.

In the US, economic data were mixed. The July Markit manufacturing and services Purchasing Managers’ Indexes (PMIs) came in at 55.3 and 56.0, respectively—both slightly below expectations. The July ISM manufacturing and non-manufacturing PMI surveys fell to 58.1 and 55.7, respectively. However, all four PMI readings indicated expansion. June exports fell 0.7% m/m while imports rose 0.6% m/m, respectively. July nonfarm payrolls increased by 157,000, missing estimates. The June unemployment rate fell slightly to 3.9%. As expected, the Fed left monetary policy unchanged. On Wednesday, President Trump suggested raising the rate from 10% to 25% on $200 billion worth of proposed tariffs on Chinese goods. In response, China indicated it would retaliate with tariffs on $60 billion worth of US goods with rates ranging from 5% to 25%. Although these numbers may sound large, all tariffs currently implemented and threatened should have a negligible impact on global growth in our view. Additionally, we believe stocks should benefit as widespread trade war fears are proven false.

In the eurozone, economic releases were also mixed. The first estimate of Q2 2018 GDP was 2.1% y/y, slightly below expectations. The July Markit manufacturing PMI was confirmed at 55.1, in line with the initial estimate, while the services PMI fell to 54.2, slightly below the initial estimate. Both readings indicate continued economic growth. June retail sales rose 1.2% y/y. The June eurozone unemployment rate remained unchanged at 8.3%. In the UK, the July Markit/CIPS manufacturing and services PMIs fell to 54.0 and 53.5, both below expectations, while the construction PMI rose to 55.8, beating estimates. On Thursday, the Bank of England raised interest rates by 25 basis points to 0.75%.

In Asia, Japan’s Nikkei manufacturing and services PMIs were reported at 52.3 and 51.3. June retail sales increased 1.8% y/y, more than expected. The June unemployment rate rose to 2.4%, higher than forecast. The Bank of Japan left core aspects of monetary policy unchanged. China’s official July manufacturing and non-manufacturing PMI surveys, including large, state-owned firms, fell to 51.2 and 54.0, respectively—both below market estimates. The July Markit/Caixin manufacturing and services PMIs, which capture smaller businesses in the Chinese economy, fell to 50.8 and 52.8, respectively.

The Week Ahead:

The US releases July inflation figures. The UK posts June trade data, industrial production and the first estimate of Q2 2018 GDP. China announces July trade and inflation data. Japan reports July bank lending and the first estimate of Q2 2018 GDP.

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.