Fisher Investments recaps the biggest market, political and economic news from last week, including US Purchasing Managers Index (PMI) figures, eurozone M3 money supply and Japanese core-core consumer prices.
Global markets fell as an uptick in COVID-19 cases in select US states renewed concerns over a “second wave” of infections disrupting reopening plans. However, when states first began ending lockdowns, many warned the process could occur in fits and starts rather than a smooth transition. Additionally, second wave fears have been widely discussed for months. Thus, while setbacks to some states’ reopening plans are worth closely monitoring, we believe they likely lack the surprise power to move markets for long. With many investors fearing a return to widespread lockdowns, those worst-case expectations set a low threshold for reality to exceed and propel stocks forward. Portfolios outperformed as our overweight to Information Technology added to relative performance.
In the US, the third estimate of Q1 2020 GDP growth remained unchanged at -5.0% annualized. The June Markit Flash Manufacturing and Services Purchasing Managers’ Indexes (PMI) rose from their prior month’s readings to 49.6 and 46.7, respectively (readings below 50 indicate contraction). May durable goods orders increased 15.8% m/m, significantly improving from April’s -18.1% m/m decline. Though May’s numbers don’t recoup all that lost ground, they are part of the growing pile of evidence pointing to a nascent economic recovery in our view.
In the UK, the June Markit/CIPS Flash Manufacturing and Services PMIs rose to 50.1 and 47.0 respectively—surpassing forecasts. In the eurozone, the June Markit Flash Manufacturing and Services PMIs came in at 46.9 and 47.3, respectively—both higher than May’s readings. May eurozone money supply (M3) increased to 8.9% y/y.
For Japan, the Conference Board’s April Leading Economic Index (LEI) decreased to 86.0. The June Jibun Bank Flash Services PMI rose to 42.3 but the Manufacturing PMI fell to 37.8. June core-core consumer prices (excluding food and energy) increased 0.4% y/y. May exports and imports fell 28.3% y/y and 26.2% y/y, respectively.
The Week Ahead:
The US reports June unemployment figures. The UK announces its second estimate of Q1 2020 GDP. The eurozone and Japan report May unemployment data. Japan also releases May retail sales and industrial production data as well as the final June manufacturing PMI reading.
Tip of the Week:
Fisher Investments’ offices will be closed on Friday, July 3, 2020 in observance of Independence Day. We will resume normal business hours on Monday, July 6, 2020.
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.