Fisher Investments recaps the biggest market, political and economic news from last week, including rising US COVID-19 cases, UK and Chinese trade data and Japanese Q1 2020 GDP.
Global markets fell as many investors worried rising COVID-19 cases in select US states may represent the long-feared “second wave” of infections. While reaccelerating virus cases are worth monitoring, we think it’s premature to suggest they will cause markets to retest their late-March lows. Renewed virus spread would likely only derail the recovery if widespread government lockdowns are reinstituted—an outcome far from certain at this time. Additionally, the potential for a second wave has been widely discussed, likely limiting its surprise power to move markets for long. For more, see our latest commentary, “Stay Cool Amid Second-Wave Worries.”
In the US, May core consumer prices (excluding food and energy) fell 0.1% m/m but rose 1.2% y/y—both slightly below expectations. The Federal Reserve left the fed funds target range at 0.0% - 0.25% and announced it would maintain the current level of quantitative easing purchases. Additionally, the Fed signaled its willingness to keep rates low for some time. However, we don’t put much weight on such “forward guidance.” Central bankers have a long history of saying one thing and then doing something different.
In the UK and eurozone, data releases continued to reflect the severe impact of government COVID-19 restrictions on economic activity in prior months. UK April industrial production fell 24.4% y/y and manufacturing production declined 28.5% y/y. Exports and imports fell 19.3% m/m and 26.2% m/m, respectively in April. In the eurozone, the third estimate of Q1 2020 GDP was revised up slightly to -3.1% y/y. April industrial production fell 28.0% y/y, slightly less than forecast.
Japan’s second estimate of Q1 2020 GDP was revised up to -1.7% y/y, slightly better than expected. April industrial production fell 15.0% y/y. In China, May money supply (M2) rose 11.1% y/y and total outstanding loans increased 13.2% y/y. Consumer prices rose 2.4% y/y in May, slightly below estimates and decelerating from April. May exports fell 3.3% y/y, less than forecast, while imports fell 16.7% y/y, more than expected.
The Week Ahead:
The US, UK, Japan and China release May retail sales. The US and China also report May industrial production. The UK, eurozone and Japan announce May inflation data. The Bank of England and Bank of Japan 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.