Fisher Investments recaps the biggest market, political and economic news from last week, including easing COVID-19 restrictions, US and UK Purchasing Managers Index (PMI) readings and Japan’s Q1 2020 GDP reading.
Global markets rose primarily on positive vaccine prospects, continuing what appears to be a “V-shaped” recovery. However, as we’ve said before, it’s impossible to know if the current trend will continue and even then it’s unlikely stocks move in a straight line up from here.
In the US, COVID-19 lockdowns have continued easing gradually. Last Friday, the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act—a $3 trillion stimulus relief package providing for a second round of $1,200 stimulus checks and an additional $1 trillion in funding for state and local governments among a variety of other measures. The Heroes Act is currently under review in the Senate—whether the bill passes remains to be seen. US economic data generally showed improvement, but remained depressed—as expected. The Leading Economic Index (LEI) declined 4.4% m/m to 98.8 in April, but beat expectations and improved from March’s revised reading of a 7.4% m/m decrease. May Markit manufacturing and services Purchasing Managers’ Indexes (PMIs) came in at 39.8 and 36.9, both improving from April readings of 36.1 and 26.7. Readings below 50 indicate contraction.
In the eurozone, several countries have initiated the process of restarting their economies—for more, please see our 5/18/2020 commentary, “Reopening in Europe and Australia.” In economic data, May Markit manufacturing and services PMIs posted at 39.5 and 28.7, both beating expectations. April core consumer prices (excluding food and energy) increased 0.9%, meeting consensus. In the UK, CIPS manufacturing and services PMIs increased to 40.6 and 27.8, with both improving substantially from April’s readings of 32.6 and 13.4. April core consumer prices increased 1.4%, while retail sales decreased 22.6% y/y, in line with estimates.
In Asia, data were light. Japan’s first reading for Q1 2020 GDP showed a decrease of 3.4% q/q, slightly beating expectations. Industrial production remained the same as the prior reading, decreasing 3.7% m/m in March. Core consumer prices decreased 0.1% y/y in April.
The Week Ahead:
The US reports the second reading of Q1 2020 GDP and initial jobless claims. The eurozone releases money supply and consumer price data. Japan posts the revised March LEI, import and export data, preliminary April retail sales and industrial production.
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.