Fisher Investments recaps the biggest market, political and economic news from last week, including US April Purchasing Managers' Index (PMI) figures, eurozone March retail sales, and Chinese April trade data.
In the US, the final April Markit Manufacturing Purchasing Managers’ Index (PMI) was revised slightly lower to 60.5 (readings over 50 indicate expansion) while the April Markit Services PMI was revised up to 64.7 from the preliminary 63.1 estimate. March imports rose 6.3% m/m—reaching a record high of $274.5 billion. Meanwhile, March exports rose 6.6% m/m to $200 billion, the highest level since February 2020. Final March durable goods orders were revised up to 0.8% m/m, lower than expected. The April unemployment rate rose modestly to 6.1%. April nonfarm payrolls expanded by 266,000, well below the consensus forecast for 978,000—fueling concerns over the economic recovery. However, jobs data are historically late-lagging indicators—stocks and the broader economy typically recover faster, with the job market recovery following later. So while there is still a ways to go for a full job market recovery, it isn’t very relevant for forward-looking stocks in our view.
In the UK, the final April Markit/CIPS Manufacturing and Services PMIs were both revised higher to 60.9 and 61.0, respectively. March money supply (M4) rose 0.6% m/m and 10.8% y/y. The Bank of England left interest rates and asset purchases unchanged. In the eurozone, the final April Markit Manufacturing PMI was revised down slightly to 62.9, while the final April Markit Services PMI was revised up slightly to 50.5. March retail sales rose 12.0% y/y. With reporting a Q1 2021 GDP decline last Friday, the eurozone confirmed it fell into a “double-dip” recession—defined as two or more consecutive quarters of contraction that follow a short-lived recovery from a previous recession. However, we believe markets have already priced in backward-looking economic data like GDP, and we expect the eurozone’s economic recovery to soon follow other major global economies in returning to pre-COVID growth trends as vaccination distribution progress continues. For more, please see our 5/5/2021 commentary, “A Quick Lesson Hidden in the Eurozone’s Double Dip.”
In Asia, data releases were light amid bank holidays. In Japan, the final April Jibun Bank Services PMI was revised higher to 49.5 yet still indicated contraction. In China, the April Markit/Caixin Services PMI rose to 56.3. April exports rose 32.3% y/y, significantly higher than consensus estimates, and imports rose 43.1% y/y, narrowly missing expectations.
The Week Ahead:
The US reports April retail sales and industrial production. The US and China announce April consumer prices. The eurozone releases March industrial production figures. The UK reports preliminary Q1 2021 GDP and March industrial production. Japan and China release April money supply (M2) data. Japan also announces the preliminary March Leading Economic Index (LEI) reading.
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.