Fisher Investments recaps the biggest market, political and economic news from last week, including US trade, eurozone money supply and Japanese industrial production releases.
Global markets rose as headlines continued focusing on the US yield curve, Brexit and US-China trade talks. US data were light. The third estimate of Q4 2018 GDP was 2.2% q/q annualized, unchanged from the previous estimate. January exports rose 0.9% m/m and imports fell 2.6% m/m. New housing starts declined 8.7% m/m in February, below expectations, while February new home sales increased 4.9% m/m, more than expected. Many headlines continued to highlight the US 10-year and 3-month Treasury yield curve inverting intraday. In our view, the current US yield curve inversion is well-publicized and lacks surprise power—reducing the market impact moving forward. Additionally, yield curve inversion isn’t a timing tool—there is often a long lag between inversion and a bear market starting. For more, please see our 3/22/2019 MarketMinder commentary, “More on the Myth of the All-Powerful Fed.”
European data were also sparse. Eurozone February money supply (M3) grew 4.3% y/y, ahead of forecasts, and February household lending rose 3.3% y/y. In the UK, Brexit continued to dominate headlines as Prime Minister Theresa May tried to coalesce support for her proposed deal. Parliament voted on nine different Brexit-related measures, with all failing except an extension of the Brexit deadline to April 12. For more, please read our 3/27/2019 MarketMinder article, “Today in Brexit, Day 1007.” The second reading of Q4 2018 GDP was revised up to 1.4% y/y.
In Asia, Japan’s February industrial production decreased 1.0% from a year ago, but increased 1.4% from January. February retail sales rose 0.4% y/y, decelerating from January. The February unemployment rate decreased to 2.3% from 2.5% in January. Another round of US-China trade negotiations were held in Beijing. In our view, an eventual trade deal would be nice—likely helping lift sentiment—but we don’t think a deal is necessary for the bull market to continue.
The Week Ahead:
US data releases include February durable goods orders, retail sales and the final March manufacturing and services Purchasing Managers’ Indexes (PMIs). The eurozone and UK post final March manufacturing and services PMIs. The UK Parliament will hold another Brexit-related vote on Monday. The eurozone reports February retail sales and the unemployment rate. Japan publishes February household spending, while China releases its March manufacturing and services PMI.
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.