Weekly Wrap-Up

Last Week In Markets: Mar 5 - 9, 2018

Fisher Investments recaps the biggest market, political and economic news from last week, including US tariff announcements, the Italian and German election results, Chinese export values and the signing of the Comprehensive & Progressive Agreement for Trans-Pacific Partnership.

Global stocks ended the week 3.5% higher. US economic data were positive. The February Markit services Purchasing Managers’ Index (PMI) rose to 55.9. Similarly, the February ISM non-manufacturing PMI came in at 59.5. Readings above 50 indicate expansion. February nonfarm payrolls increased by 313,000, handily beating expectations. The February unemployment rate remained unchanged at 4.1%, and wage growth decelerated modestly. On Thursday, President Trump authorized widely anticipated steel and aluminum tariffs, notably exempting Mexico and Canada. Many investors worry this is the opening act of an impending trade war, however industry-specific tariffs are common and historically lack the size and scope to derail broader trade or other economic activity. For more, see our 3/7/2018 MarketMinder article, “Scaling Tariffs and Reviewing History.

In the eurozone, the third estimate of Q4 2017 GDP was reported at 2.7% y/y, as expected. The February Markit services PMI came in at 56.2, missing expectations but still indicating expansion. January retail sales fell 0.1% m/m but rose 2.3% y/y. The European Central Bank left monetary policy unchanged. In Germany, Angela Merkel’s Christian Democratic Union re-established its grand coalition with the Social Democratic Party. Italy held elections and no single party received enough votes to form a government, ensuring gridlock. These German and Italian political developments largely maintain the status quo, reduce political uncertainty and should allow investors to focus on the eurozone’s positive economic fundamentals. For more, see our 3/5/2018 MarketMinder commentary, “Italy's Election: Let the Games Begin!” In the UK, January industrial and manufacturing production increased 1.6% and 2.7% y/y, respectively—beating expectations. The February Markit/CIPS services PMI rose to 54.5, ahead of estimates. February retail sales rose 1.6% y/y.

In Asia, data positively surprised. China’s February export values rose 44.5% y/y, skewed by the Chinese New Year. February consumer prices rose 2.9% y/y. Japan’s Q4 2017 GDP was revised to 2.0% y/y. The February Nikkei Services PMI inched down to 51.7, missing expectations. The Bank of Japan left rates and its asset purchase program unchanged. Japan and 10 other Asia-Pacific nations signed the Comprehensive & Progressive Agreement for Trans-Pacific Partnership, removing most tariffs and improving market access between member nations—a positive for global free trade.

In Asia, data were mixed. Japan’s January industrial production fell 6.6% m/m—more than expected—but rose 2.7% y/y. January retail sales fell 1.8% m/m but rose 1.6% y/y. In China, the official February manufacturing and non-manufacturing PMI surveys, including large, state-owned firms, came in at 50.3 and 54.4, respectively—both below estimates. The February Markit/Caixin manufacturing PMI, which includes smaller businesses, rose slightly to 51.6.

The Week Ahead:

The US releases February inflation, industrial production and retails sales. The eurozone announces February inflation and January industrial production figures. Japan releases January industrial production and February trade data.

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.