Fisher Investments recaps the biggest market, political and economic news from last week, including US inflation data, UK manufacturing production and Japanese LEI.
In the US, data were light as headlines continued to focus on ongoing political news in Washington. Consumer prices rose 1.7% y/y while core consumer prices (excluding food and energy) rose 2.4% y/y in September, in line with expectations. Core producer prices (excluding food and energy) rose 2.0% y/y in September, decelerating slightly from August. On Friday, President Trump met with Chinese Vice Premier Liu He to discuss trade. After the meeting, they announced a tentative ‘Phase One Deal,’ reportedly averting US tariff increases scheduled to go into effect next week. While sentiment seems to shift as the trade winds blow, the maximum payments under US-China tariffs—including all proposed escalation—represent less than half a percent of global GDP. In our view, since the impact of tariffs is smaller than most fear, markets can rise whether or not trade talks continue smoothly from here or not.
In the United Kingdom, August industrial production fell 1.8% y/y, below consensus estimates. Manufacturing production fell 1.7% y/y in August as well. September housing prices rose 1.1% y/y, slightly less than the prior month. August export and import values increased 0.9% m/m and 0.6% m/m, respectively. The Office for National Statistics reported GDP rose by 0.3% in the three months ending in August—beating forecasts and providing a counterpoint to fears that ongoing Brexit negotiations will drag the UK economy into recession. We continue to believe that any resolution to Brexit at this point will allow companies and investors to move forward with more certainty, providing an eventual tailwind for markets.
In Japan, the preliminary reading of the August Leading Economic Index was released at 91.7, falling from July and below expectations. September bank lending rose 2.0% y/y, in line with forecasts. September household spending increased 1.0% y/y. In China, the September Caixin Services Purchasing Managers’ Index (PMI) fell slightly to 51.3, below expectations but still signaling expansion.
The Week Ahead:
The US will release September industrial production and retail sales. The eurozone reports August industrial production and trade data as well as September inflation figures. The UK announces September inflation and retail sales. China posts September industrial production, loan growth, inflation, retail sales, trade data and Q3 2019 GDP growth. Japan reports August industrial production and September inflation figures.
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.