Fisher Investments recaps the biggest market, economic and political news from last week, including updates on eurozone trade data, the European Central Bank’s announcement and GDP data in Japan.
Global equities rose 1.3% amid a respite in US-China trade tensions and mixed economic data. US economic data were light. August core consumer prices (excluding food and energy) rose 2.4% y/y, slightly higher than forecast. August retail sales rose 4.1% y/y, beating expectations. Wholesale inventories rose 0.2% m/m in July—in line with expectations.
In the eurozone, July industrial production fell 0.4%, below estimates. July eurozone imports and exports rose 2.3% y/y and 6.2% y/y, respectively. The European Central Bank (ECB) announced a 10 basis point cut to its key deposit rate while also restarting its quantitative easing (QE) program. In our view, while pushing rates further negative and restarting QE are modest negatives, these are offset by the modest positives of certain deposits being exempt from negative rates and the ECB extending interest-free loan capital to banks. While these measures may be intended to help alleviate fears about the eurozone economy, we believe they are unnecessary for this bull market and economic expansion to continue. For more, please see our 09/12/2019 commentary, “Breaking Down the ECB’s Wrongheaded ‘Stimulus,’ Q&A Style.”
In the UK, July industrial production fell 0.9% y/y—beating forecasts. UK imports and exports increased 2.7% m/m and 2.5% m/m, respectively in July. In political news, the House of Commons rejected Prime Minister Boris Johnson’s second call for a general election and as expected, Parliament was suspended for five weeks until October 14. While Brexit noise will likely continue in the near term, our view remains unchanged: When the Brexit fog clears and a final outcome is known, whatever form that takes, it should bring relief. For more, please see our 09/10/2019 commentary, “About That Other Supposed Political Risk for UK Stocks.”
In China, August outstanding loans grew 12.4% y/y, slightly less than expected. August consumer prices rose 2.8% y/y, slightly higher than forecast. August exports and imports both fell—1.0% y/y and 5.6% y/y, respectively. In Japan, Q2 2019 GDP was revised down 1.0% y/y from a prior reading of 1.2%. July industrial production grew 0.7% y/y, in line with the consensus, and August bank lending also grew 2.1% y/y. July retail sales fell 2.0% y/y.
The Week Ahead:
The US releases August leading economic indicator (LEI) and industrial and manufacturing production data. The eurozone, UK and Japan announce August consumer prices figures. The UK and China release August retail sales numbers. Japan releases August trade data. The Fed, Bank of England and Bank of Japan meet to set their respective monetary policies.
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.