Global markets rose amid improving economic data. In the US, non-farm payrolls increased by 2.5 million in May while the unemployment rate fell to 13.3%—both significantly better than expected. The May Markit manufacturing and services Purchasing Managers’ Indexes (PMI) were reported at 39.8 and 37.5, respectively (readings over 50 indicate expansion). The May ISM non-manufacturing PMI came in at 45.4, beating estimates. April durable goods orders fell 17.7% m/m (-7.7% m/m excluding transportation orders).
In the UK, the May Markit/CIPS manufacturing and services PMI were reported at 40.7 and 29.0, respectively. In the eurozone, the unemployment rate ticked up to 7.3% in April, lower than expected. May Markit manufacturing and services PMIs were reported at 39.4 and 30.5, respectively. April retail sales fell 19.6% y/y, ahead of expectations. The European Central Bank kept interest rates steady while increasing its bond purchasing program by €600 billion—bringing its total quantitative easing (QE) program to €1.35 trillion. As we have written previously, in our view, markets don’t require help in the form of “accommodative” monetary easing or government spending. We think QE in particular hinders growth, since it flattens the yield curve—discouraging banks from lending, which weighs on money supply growth. That said, QE won’t prevent a recovery, though it won’t boost growth, either. What matters more for the economy and markets is how soon businesses can get back to operating as normal following COVID lockdowns.
In Japan, the May Nikkei services PMI rose to 26.5 while final May Markit/JMMA manufacturing PMI remained at 38.4. April household spending fell 11.1% y/y. Chinese data were light. The May Markit/Caixin manufacturing and services PMIs were 50.7 and 55.0, respectively, beating expectations.
The Week Ahead:
The US reports May inflation. The UK and eurozone release April industrial production and the Eurozone announces revised Q1 GDP. China releases May trade data, loan growth and consumer prices. Japan reports Q1 2020 GDP and April industrial production.
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.