Fisher Investments recaps the biggest market, political and economic news from last week, including US GDP growth, Markit Purchasing Manager’s Indexes and eurozone money supply growth.
Global markets fell 2.5% this week as data continued to confirm the now-widely expected economic contraction resulting from COVID-19 lockdown measures. While lockdowns gradually ease across many states and countries, when (and how) a full return to normal remains to be seen. However, in our view, as economies safely re-open and remain open, stocks should benefit. For more, please see our 05/08/2020 commentary, “What Recovery Pessimism Means for Stocks.”
As largely expected, global economic data reports this week were dour. However, economic data don’t need to turn positive for stocks to move higher from here. Stocks likely discount a brighter economic future long before data begins to reflect it. For more on the relationship between stocks and economic reporting, please see our 04/03/2020 commentary, “How Bleak March Data Help Markets Anticipate the Future.” In the US, data were light. April core consumer prices (excluding food and energy) declined 0.4% m/m, worse than estimated. April retail sales fell 16.4% y/y. April industrial and manufacturing production fell 11.2% y/y and 13.8% y/y respectively.
In the eurozone, the second estimate of Q1 2020 GDP showed a decline of 3.2% y/y, in line with estimates. March industrial production fell 12.9% y/y. In the UK, the preliminary estimate of Q1 2020 GDP showed a 1.6% y/y decline. Preliminary March imports fell 5.3% y/y, while exports fell 10.8% y/y. Both missed forecasts. March industrial and manufacturing production fell 8.2% y/y and 9.7% y/y respectively, slightly better than analyst forecasts for each.
In Japan, April bank lending increased 3.0% y/y. Preliminary April Leading Economic Index (LEI) figures decreased 8.8% from the prior month. In China, core consumer prices (excluding food) increased 0.4% y/y in April, slightly below estimates. April retail sales fell 7.5% y/y, an improvement from the prior reading. April industrial production rose 3.9% y/y. New yuan loans in April also decreased 0.4% m/m, but exceeded initial forecasts. April money supply (M2) also modestly increased to 11.1% y/y.
The Week Ahead:
The US, eurozone, UK, and Japan release preliminary May manufacturing and services Purchasing Managers’ Indexes (PMIs). Additionally, the US releases April LEI figures, the eurozone, UK and Japan post April inflation data, the UK announces April retail sales and Japan shares final March industrial production 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 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.