Fisher Investments recaps the biggest market, political and economic news from last week, including US retail sales, UK inflation and Japanese trade data.
Global markets rose 2.3% despite continued concerns stocks are out-of-touch with economic reality and that a second wave of infections could disrupt the recovery. In the US, May’s Leading Economic Index (LEI) beat expectations and increased 2.8% m/m after declining in March and April. Manufacturing production declined 16.5% y/y in May while rising 3.8% m/m, improving from the prior reading. May housing starts increased 4.3% m/m, missing estimates. May retail sales increased 17.7% m/m but fell 6.1% y/y—an improvement following April’s -19.9% y/y decline. May industrial production increased 1.4% m/m while falling 15.3% y/y, both beating analyst forecasts. Please see our 6/16/2020 commentary for a deeper look at how the components underpinning these data offer some clues into how the US economy is responding to a gradual reopening, “More May Data Hint a Recover May Be Underway.”
In the UK, May core consumer prices (excluding food and energy) increased 1.2% y/y, narrowly missing analyst estimates. May retail sales grew 12.0% m/m but fell 13.1% y/y, both exceeding forecasts. The Bank of England (BOE) kept short-term interest rates steady at 0.1%. However, the BOE announced an additional £100 billion in bond buying, bringing its total planned purchases to £745 billion. In the eurozone, May core consumer prices (excluding energy, food, alcohol and tobacco) rose 0.9% y/y.
In Japan, April retail sales were revised down slightly to -13.9% y/y, missing expectations. May core-core consumer prices (excluding food and energy) increased 0.1% y/y. Trade data disappointed; May exports and imports fell to -28.3% y/y and -26.2% y/y, respectively. The Bank of Japan kept its short-term interest rate steady at -0.1% but announced it will increase the total size of its business lending programs from ¥55 trillion to ¥90 trillion. In China, May retail sales declined -2.8% y/y but improved from the April reading of -7.5% y/y. May industrial production rose 4.4% y/y, modestly surpassing initial estimates.
The Week Ahead:
The US, UK, eurozone and Japan announce June purchasing managers’ index (PMI) readings. The US also releases its third estimate of Q1 2020 GDP. The eurozone posts May money supply (M3). Japan also announces June inflation and final April Leading Economic Index (LEI) 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.