Daily Commentary
Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.
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What We're Reading
Euro Zone Inflation Falls More Than Expected to 6.1% as Core Pressures Ease
The Quiet Brexit Success Story Remainers Don’t Want to Talk About
South Korea Export Slide Eases, Signaling Global Demand Bottom
By Jenni Reid, CNBC, 6/1/2023
MarketMinder’s View: Inflation figures worldwide continue to work their way back to a semblance of normal, and today, eurozone prices joined the party. “Inflation in the euro zone eased more than expected in May, with flash figures showing the bloc’s annual headline inflation rate fell to 6.1% in May from 7% in April. This is the lowest level since February 2022. Economists polled by Reuters had expected a May reading of 6.3%. Core inflation, excluding energy and food, also fell more than expected, to 5.3% from 5.6%. Annual inflation in Germany and France dropped more than forecast in May, according to data released on Wednesday, as prices dipped on the previous month. Price rises in the euro area’s largest economies are now at 12-month lows.” Unsurprisingly, the rest of this short wrap-up focuses on potential ECB moves in reaction to underlying price pressures, which we recommend readers tune down. Whether the ECB, Fed, Bank of England or any other central bank, monetary officials’ decisions aren’t predictable, and their views can change without warning. Instead, take the latest price data from the Continent as more evidence that one of the biggest fears over the past 12 months continues to ease—a fillip for investors.
The Quiet Brexit Success Story Remainers Don’t Want to Talk About
By Julian Jessop, The Telegraph, 6/1/2023
MarketMinder’s View: Please note, MarketMinder isn’t for or against Brexit—as with any political change, there are winners and losers, though we never subscribed to the notion that the UK’s leaving the EU would doom (or buoy) the former’s economic and market prospects. Yet with the referendum’s seventh anniversary in a few weeks, we continue to see arguments that Brexit has been bad for the UK—claims this even-handed piece takes to task. Now, arguments like this are tricky because the counterfactual is always a question mark. However, there is a lot of evidence the UK economy hasn’t been permanently injured, even if it hasn’t yet reaped all of the benefits envisioned by those who opted to leave. Consider the UK’s financial services industry, which many thought would suffer a fatal blow in losing access to the EU’s single market. Yes, firms adjusted by adding to their EU presence. “However, the overall impact has been far less than feared. As much as £1.3 trillion of assets may have been transferred from the UK to the EU, but this is largely just a question of where transactions are booked. Very few jobs have followed – perhaps 7,000 in a sector employing over a million – and much of the associated tax revenue seems to have stayed in the UK. In the meantime, London remains by far Europe’s most competitive financial centre. Indeed, according to the latest Global Financial Centres Index, Edinburgh and Glasgow both ranked above Dublin and Milan.” As the rest of this piece acknowledges, challenges remain for UK companies, from navigating red tape in other countries to figuring out labor shortfalls in certain sectors. But those aren’t insurmountable issues, and “… Britain’s services industries continue to thrive – despite Brexit scaremongering.”
South Korea Export Slide Eases, Signaling Global Demand Bottom
By Bloomberg, Bloomberg, 6/1/2023
MarketMinder’s View: No sugarcoating anything here: The latest trade numbers out of tech hub South Korea, which many view as a barometer for global trade, are poor. Exports registered their eighth-straight monthly drop, falling -15.2% y/y in May, while imports slipped -14.0%. Looking more granularly, “Shipments to six of Korea’s major trading partners declined in May, plunging the most for goods headed to Central and South America. Exports to China dropped 21 percent, the smallest drop since October. Exports of chips slumped 36 percent as China and tech companies continue to work through a glut of inventory, and overseas shipments of displays fell 7.4 percent, the trade ministry said in a separate statement.” For as weak as the numbers are, though, some analysts sense the worst has passed. A bottom will be clear only in hindsight, and we don’t dismiss the possibility of future weakness. But the reactions to Korean exports suggest most recognize a well-known soft patch—and people are processing it and starting to move on. Getting beyond old news can help investors recognize the global economy isn’t in as dire straits as many think.
What We're Reading
Euro Zone Inflation Falls More Than Expected to 6.1% as Core Pressures Ease
The Quiet Brexit Success Story Remainers Don’t Want to Talk About
South Korea Export Slide Eases, Signaling Global Demand Bottom
By Jenni Reid, CNBC, 6/1/2023
MarketMinder’s View: Inflation figures worldwide continue to work their way back to a semblance of normal, and today, eurozone prices joined the party. “Inflation in the euro zone eased more than expected in May, with flash figures showing the bloc’s annual headline inflation rate fell to 6.1% in May from 7% in April. This is the lowest level since February 2022. Economists polled by Reuters had expected a May reading of 6.3%. Core inflation, excluding energy and food, also fell more than expected, to 5.3% from 5.6%. Annual inflation in Germany and France dropped more than forecast in May, according to data released on Wednesday, as prices dipped on the previous month. Price rises in the euro area’s largest economies are now at 12-month lows.” Unsurprisingly, the rest of this short wrap-up focuses on potential ECB moves in reaction to underlying price pressures, which we recommend readers tune down. Whether the ECB, Fed, Bank of England or any other central bank, monetary officials’ decisions aren’t predictable, and their views can change without warning. Instead, take the latest price data from the Continent as more evidence that one of the biggest fears over the past 12 months continues to ease—a fillip for investors.
The Quiet Brexit Success Story Remainers Don’t Want to Talk About
By Julian Jessop, The Telegraph, 6/1/2023
MarketMinder’s View: Please note, MarketMinder isn’t for or against Brexit—as with any political change, there are winners and losers, though we never subscribed to the notion that the UK’s leaving the EU would doom (or buoy) the former’s economic and market prospects. Yet with the referendum’s seventh anniversary in a few weeks, we continue to see arguments that Brexit has been bad for the UK—claims this even-handed piece takes to task. Now, arguments like this are tricky because the counterfactual is always a question mark. However, there is a lot of evidence the UK economy hasn’t been permanently injured, even if it hasn’t yet reaped all of the benefits envisioned by those who opted to leave. Consider the UK’s financial services industry, which many thought would suffer a fatal blow in losing access to the EU’s single market. Yes, firms adjusted by adding to their EU presence. “However, the overall impact has been far less than feared. As much as £1.3 trillion of assets may have been transferred from the UK to the EU, but this is largely just a question of where transactions are booked. Very few jobs have followed – perhaps 7,000 in a sector employing over a million – and much of the associated tax revenue seems to have stayed in the UK. In the meantime, London remains by far Europe’s most competitive financial centre. Indeed, according to the latest Global Financial Centres Index, Edinburgh and Glasgow both ranked above Dublin and Milan.” As the rest of this piece acknowledges, challenges remain for UK companies, from navigating red tape in other countries to figuring out labor shortfalls in certain sectors. But those aren’t insurmountable issues, and “… Britain’s services industries continue to thrive – despite Brexit scaremongering.”
South Korea Export Slide Eases, Signaling Global Demand Bottom
By Bloomberg, Bloomberg, 6/1/2023
MarketMinder’s View: No sugarcoating anything here: The latest trade numbers out of tech hub South Korea, which many view as a barometer for global trade, are poor. Exports registered their eighth-straight monthly drop, falling -15.2% y/y in May, while imports slipped -14.0%. Looking more granularly, “Shipments to six of Korea’s major trading partners declined in May, plunging the most for goods headed to Central and South America. Exports to China dropped 21 percent, the smallest drop since October. Exports of chips slumped 36 percent as China and tech companies continue to work through a glut of inventory, and overseas shipments of displays fell 7.4 percent, the trade ministry said in a separate statement.” For as weak as the numbers are, though, some analysts sense the worst has passed. A bottom will be clear only in hindsight, and we don’t dismiss the possibility of future weakness. But the reactions to Korean exports suggest most recognize a well-known soft patch—and people are processing it and starting to move on. Getting beyond old news can help investors recognize the global economy isn’t in as dire straits as many think.