Weekly Wrap-Up

Last Week In Markets: May 27 - May 31, 2019

Fisher Investments recaps the biggest market, political and economic news from last week, including global trade threats, European Parliament election results and Japanese trade data.

On Thursday, President Trump announced plans to impose tariffs on all imports from Mexico beginning June 10. The tariff rate would start at 5%, potentially rising incrementally to 25% on October 1 unless certain immigration demands are met. While this new threat certainly adds to already heightened trade fears, it still falls short of the multi-trillion dollar impact likely required to derail the global economy—even when combined with other already enacted or proposed tariffs. We believe these trade fears likely subside, especially as we draw closer to the 2020 US elections and global fundamentals remain positive. US data releases were light. The second estimate of US Q1 2019 GDP was revised slightly lower to 3.1% q/q from 3.2% q/q.

In the eurozone, April money supply (M3) and household lending grew 4.7% y/y and 3.4% y/y, respectively—both more than forecast. European Parliament elections concluded Sunday, and resulted in traditional center left and right parties losing seats, with the Greens and Liberals gaining a larger share and a smaller portion going to euro-skeptic parties. Historically, the European Parliament—like national legislatures across Europe—was stacked in the center, with just a smattering of support for fringe parties. Populists’ ascent has moved support from the center to the edges of the political spectrum, diluting political power and increasing gridlock. In our view, the conclusion of this election and resulting increased gridlock helps reduce uncertainty—a positive for European markets. For more, please see our 5/28/2019 commentary, “Europe Has a Parliament—and Gridlock.” In the UK, money supply (M4) grew 3.0% y/y. 

In Asia, the official Chinese May manufacturing purchasing managers’ index (PMI), including large, state-owned firms, fell to 49.4—lower than expected (readings under 50 indicate contraction). The official May non-manufacturing PMI rose to 54.3, in line with estimates. In Japan, April data was mixed. Exports fell 2.4% y/y and imports rose 6.5%. Industrial production rose 0.6% m/m, but fell 1.1% y/y. Retail sales rose 0.5% y/y and unemployment fell slightly to 2.4%.

The Week Ahead:

The US releases April durable goods orders, May nonfarm payrolls, unemployment data and services and manufacturing PMIs. The eurozone reports May trade data, the third estimate of Q1 2019 GDP, April retail sales, unemployment as well as manufacturing and services PMI figures. The European Central Bank meets to set monetary policy. China and Japan announce May services PMIs.

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.