Despite volatility, global equities ended slightly higher at 0.2%, as markets digested political news from the US and Brazil.
US and Brazilian politics dominated headlines. In the US, former FBI Director Robert Mueller was appointed special counsel to investigate ties between Russia and Trump’s presidential campaign. In our view, comparisons to previous high-profile investigations like Watergate or the Lewinsky scandal are likely misplaced at this stage. Impeachment is rare and no president has been removed from office because of it—Nixon resigned and the Senate acquitted Clinton. In Brazil, allegations of political bribes swirled around new President Michel Temer. If proven true, the country’s second presidential impeachment in as many years likely follows. Despite short-term volatility surrounding these events, we expect little long-term impact.
US economic data were mixed. April’s Leading Economic Index rose 0.3% m/m, reflecting broad-based gains in the economy, a positive interest rate spread and lower unemployment claims. April industrial production grew 1.0% m/m, accelerating from March and beating estimates handily. Weekly jobless claims ticked lower to 232k, reaching levels not seen since the early 1970s. Weekly mortgage applications fell 4.1%, while housing starts and building permits slowed.
In Europe, data indicated growing economic strength. April eurozone inflation rose to 1.9% y/y. The second reading of eurozone Q1 2017 GDP confirmed the initial estimate of 0.5% q/q. In the UK, April core retail sales grew 4.5% y/y, well ahead of estimates, and inflation accelerated to 0.5% m/m.
In Asia, data releases were few, but positive. The first release of Japanese Q1 2017 GDP showed growth of 0.5% q/q, beating estimates. This marks the fifth consecutive quarter of economic growth for Japan—the longest growth stretch since 2006. March Japanese industrial production was revised upward.
In the US, President Trump heads to Saudi Arabia for his first overseas trip since inauguration. Data reports include the second estimate of Q1 2017 GDP, April durable goods orders and existing home sales. The UK reports Q1 2017 GDP. The eurozone releases May purchasing managers indexes and Japan releases April inflation 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.