Weekly Wrap-Up

Last Week In Markets: Oct 2 - Oct 6, 2017

Fisher Investments recaps the biggest market, political and economic news from last week, including economic data releases and the independence vote in Catalonia.

Global equities rose 0.7% amid generally positive economic reports.

US economic data were mixed. The September ISM non-manufacturing Purchasing Managers’ Index (PMI) jumped to 59.8, beating the consensus forecast and suggesting broad expansion (PMI readings over 50 indicate growth). The September ISM manufacturing PMI expanded to 60.8—the strongest reading since 2004. September non-farm payrolls contracted by 33,000 m/m as hurricanes Irma & Harvey impacted payrolls more than expected. The September unemployment rate fell to 4.2%, lower than forecasted. August exports increased 0.4% m/m while imports declined 0.1% m/m.

UK and eurozone data were mostly positive. September UK IHS Markit / CIPS services PMI—representing around 80% of the UK economy—climbed to 53.6, beating expectations. September eurozone IHS Markit services and manufacturing PMIs rose to 55.8 and 58.1, respectively. The August eurozone unemployment rate remained at 9.1%. August eurozone retail sales fell 0.5% m/m but rose 1.2% y/y. August eurozone producer prices increased 0.3% m/m.

An independence vote in Catalonia over the weekend raised some short-term uncertainty for Spain, but the impact on the eurozone as a whole is limited at this stage. In our view, the Catalonian independence movement is unlikely to succeed given the Spanish federal government and the European Union’s refusal to recognize any move towards secession. Other eurozone members have had their share of internal strife throughout the current global bull market, yet the eurozone economy has continued expanding. Additionally, a small region potentially gaining independence while remaining in the EU and eurozone is likely far less of an investor concern than prior eurozone breakup fears, which have diminished due to this year’s election results. We will continue monitoring the situation, but as things stand right now, markets are taking this in stride.

In Asia, the People’s Bank of China announced cuts to its reserve requirement ratio for some banks. The cuts are targeted at improving access to credit for small businesses and are scheduled to take effect in 2018. Japan’s September Nikkei services PMI fell to 51.0, while the manufacturing PMI rose to 52.9.

The Week Ahead:

The US releases September consumer prices and retail sales data. The eurozone and UK report August industrial production while Germany, France, Italy and Spain post September inflation rates. China reports September Caixin PMIs and trade 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.