Last Week in Markets Weekly Wrap-Up

Last Week In Markets: Sep 05 - Sep 09 2022

Fisher Investments recaps the biggest market, political and economic news from last week including US, UK, eurozone and Japan Services PMIs, eurozone and Japan Q2 GDP, and August China inflation data.

In the US, the final August S&P Global Services Purchasing Managers’ Index (PMI) was revised down to 43.7, suggesting contraction. However, the separate August ISM Services PMI rose higher to 56.9, indicating expansion. In our view, the two PMIs taken together are consistent with other generally mixed US economic data. July imports declined 2.9% y/y while exports increased 0.2% y/y. Initial jobless claims fell to 222,000 for the week ending September 3—better than market expectations.

In the UK, the final August S&P Global/CIPS UK Services PMI was revised down to 50.9 from the original estimate. On Monday, the UK Conservative Party announced former Foreign Secretary Liz Truss as the new party leader and, on Tuesday, she replaced Boris Johnson as prime minister. Prime Minister Truss’s proposals calling for significant tax changes and spending programs may cause legislative uncertainty to remain high for some time. As this all plays out, markets will be able to gradually assign probabilities to the various potential outcomes and move on. For more, please see our 9/6/2022 article, “The Fearful, Snap Reaction to Britain’s New Prime Minister.” On Thursday, Queen Elizabeth II passed away at 96 years old after 70 years as the British monarch.

In the eurozone, the final August S&P Global Services PMI was 49.8—slightly lower than the first reading. The third estimate of Q2 2022 GDP growth was revised higher to 0.8% q/q, or 4.1% y/y. July retail sales rose 0.3% m/m, below forecasts, but fell 0.9% y/y, in-line with expectations. The European Central Bank (ECB) announced a 75 basis point rate hike—bringing its deposit facility rate up to 0.75% from 0%. Many seem to believe as long as central banks are raising rates, a new bull market can’t get underway. We think this speaks to how disconnected sentiment has become from reality. In our view, falling uncertainty, regardless of what central banks do from here, is likely all equities need to climb again. For more, please see our 9/8/2022 article, “The ECB Hike-Inspired Table of the Day.”

In Japan, the final August Jibun Bank Services PMI was 49.5—slightly above the initial estimate. The second Q2 2022 GDP estimate showed 0.9% q/q and 3.5% annualized growth—more than expected. August bank lending increased 1.9% y/y. Preliminary August money supply (M2) rose 3.4% y/y. In China, August consumer prices decreased 0.1% m/m but increased 2.5% y/y. August imports and exports grew 0.3% y/y and 7.1% y/y, respectively—both below expectations. August money supply (M2) expanded 12.2% y/y.

The Week Ahead:
The US, eurozone and UK report August inflation figures. The US, UK and China release August retail sales. The US announces August industrial and manufacturing production. The UK releases July unemployment. The eurozone and Japan report July industrial production. Japan releases preliminary August 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 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.