Global equities fell during a volatile week featuring ongoing US-China trade rhetoric.
In the US, data were mixed. The third estimate of Q1 2018 GDP was revised down to 2.0% annualized, slightly below expectations. Business inventories and personal consumption contributed to the downward revision. May durable goods orders fell 0.6% m/m, driven primarily by weak demand for transportation equipment. New home sales jumped 6.7% m/m in May, following a 3.7% drop in April. On Wednesday, Supreme Court Associate Justice Anthony Kennedy announced his retirement effective at the end of July. Although this will spur politically contentious rhetoric ahead of midterm elections, it likely doesn’t materially affect broad, global capital markets in the near term.
European data were largely positive. In the eurozone, May money supply (M3) grew 4.0% y/y, slightly beating estimates. May household lending increased 2.9% y/y, while lending to non-financial corporations rose 3.6% y/y. In the UK, the third estimate of Q1 2018 GDP was revised up to 0.2% q/q from 0.1% q/q.
In Japan, May retail sales fell 1.7% m/m but rose 0.6% y/y. Preliminary May industrial production increased 4.2% y/y, ahead of forecasts. The unemployment rate declined to 2.2% in May, below market estimates. The People’s Bank of China announced a 50 basis point cut to the required reserve ratio for some banks. The cut is targeted at supporting banks’ debt-to-equity projects and lending to small businesses
In Turkey, President Recep Erdogan won reelection on Sunday. Despite coverage characterizing Erdogan’s win as an opportunity for him to consolidate power, he largely has already done so. Ultimately, a strongman retaining his political strength isn’t a surprise for markets.
The US, eurozone, UK, China and Japan release final June manufacturing and services Purchasing Managers’ Indexes. The eurozone also reports May retail sales and unemployment. The US also announces June nonfarm payrolls, unemployment and May trade data. On Sunday, Mexico holds a general election to elect a new president and members of the legislature.
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 a Luxembourg tax basis. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.