Fisher Investments recaps the biggest market, political and economic news from last week, including US Markit Purchasing Manager’s Indexes, eurozone trade data and Japanese consumer prices.
Global markets rose as headlines focused on central bank statements. In the US, data were light. Markit’s June Manufacturing and Services Flash Purchasing Managers’ Indexes (PMIs) came in at 50.1 and 50.7, respectively—slightly lower than May’s readings but still indicating expansion. (Readings above 50 indicate expansion.) The Conference Board’s Leading Economic Index was unchanged in May, following a 0.1% m/m increase in April. On Wednesday, the Fed held rates steady—leaving the federal funds rate at the 2.25-2.50 percent target range. Many pundits attempted to dissect the Fed statement and Chair Jerome Powell’s comments for clues on the central bank’s future moves. However, in our view, overreacting to what central bankers say and trying to forecast their future decisions is fraught with peril. Additionally, we don’t believe rate cuts are necessary for this economic expansion or bull market to continue. For more, please see our 06/05/2019 commentary, “No, the Fed Doesn’t Need to Cut Rates but …”
European data were mostly positive. Markit’s June eurozone Manufacturing Flash PMI was 47.8, missing expectations, while the Services Flash PMI was 53.4, beating estimates. While concern over weak manufacturing data continues, services—not heavy industry—represent the majority of eurozone economic activity and services data remains strong. April import values increased 6.6% y/y while export values increased 5.2% y/y. Core consumer prices (excluding energy, food, alcohol and tobacco) rose 0.8% y/y in May— in-line with expectations. In the UK, May core consumer prices increased 1.7% y/y, meeting expectations. May retail sales rose 2.3% y/y, below estimates. The Bank of England also left interest rates unchanged.
In Japan, core consumer prices (excluding fresh food only) increased 0.8% y/y. May import and export values fell 1.5% y/y and 7.8% y/y, respectively. The Nikkei Manufacturing Flash PMI fell to 49.5, below expectations. The Bank of Japan left monetary policy unchanged.
The Week Ahead:
The US reports May durable goods orders, new home sales and the third estimate of Q1 2019 GDP. The UK reports the second estimate of Q1 2019 GDP. Japan releases May retail sales. Starting Friday, world leaders meet at the G20 summit in Japan—although we caution not to read too much into announcements or talk coming out of such meetings. As always, watch what politicians do and not what they say.
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.