Last Week In Markets: May 22 - 26, 2017 Weekly Wrap-Up

Last Week In Markets: May 22 - 26, 2017

Fisher Investments recaps the biggest market, economic and political news from last week, including updates on US and UK economic releases, eurozone flash Purchasing Managers Indexes, and China’s sovereign credit rating.

Global equities ended the week 1.0% higher, despite volatility, as markets digested news from Europe and the US. The week began tragically with Monday’s terrorist attack in Manchester. While terrorism holds significant human cost, history shows it has little market impact. This week was no different. Such events, though terrible, simply lack the economic or surprise power to derail a bull market. The Fed provided preliminary plans to reduce its balance sheet. US economic data were mixed. Q1 2017 earnings have grown 13.9% y/y thus far (with 494 S&P 500 companies reporting), supporting our expectation for double-digit growth this year. Q1 2017 GDP growth was revised to 1.2% annualized, beating expectations. April new and existing home sales declined to 569,000 and 5,570,000, respectively, missing expectations. April building permits also slowed to 1,228,000, while weekly mortgage applications increased to 4.4%. In the eurozone, data pointed to growing economic strength. European earnings were positive and better than expected. Eurozone May flash Purchasing Managers Indexes (PMIs) remained near recent highs, accelerating across most major categories and signaling increased future economic activity. The French composite PMI rose to 57.6, reaching its highest level in six years. In the UK, the second estimate of Q1 2017 GDP growth slightly contracted to 0.7% annualized, missing expectations. UK Q1 2017 trade data estimates showed imports growing 2.7% q/q and exports slowing 1.6% q/q. In Asia, Moody’s downgraded China’s sovereign credit rating due to concerns over debt levels and the slow pace of economic reform. The move surprised few given China’s debt levels and reform efforts have been discussed for years. Other Asian economic data releases were sparse. In Japan, April core inflation (CPI) slowed to 0.3% y/y, far below estimates. Japanese May flash manufacturing PMI decreased to 52, although still signaling economic expansion.

The Week Ahead:

The US releases May employment data, manufacturing PMI and auto sales. The UK reports April mortgage approvals and May housing prices. The eurozone posts April unemployment and May manufacturing PMI. In Asia, Japan releases April employment and trade data, and China reports May PMIs and foreign currency reserves.

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.