Last Week In Markets: Jan 30 - Feb 03, 2017
Global equities were relatively flat as investors sorted through a flurry of political headlines, economic data and corporate earnings reports.
Markets faced no shortage of political news — including an executive order on immigration, a Supreme Court justice nomination, cabinet confirmation hearings, sanctions against Iran and additional executive action impacting the financial industry. Political ideologies aside, equity markets are trending higher. We remain politically agnostic—favoring no party— rather focusing on the impacts policies hold for markets and the broader global economy. President Trump’s gruff and unorthodox tactics may make for great headlines, but we expect intra-party gridlock to ultimately reduce perceived legislative uncertainty.
US economic data were positive. The January employment report showed an increase of 227,000 in payrolls—greatly exceeding expectations for 175,000. However, more people entered the workforce, causing the unemployment rate to increase to 4.8%. December home prices gained 5.3% y/y, while personal income growth improved to 0.3% from the prior month. The January Non-Manufacturing Purchasing Managers Index (PMI) reading indicated the sizeable services component of the economy remains firmly expansionary.
The first estimate of eurozone Q4 2016 GDP was reported at 1.8% y/y— beating analyst projections. The eurozone December unemployment rate fell to 9.6%, retail sales rose 1.1% y/y and PMIs showed encouraging growth in manufacturing and services. In the UK, Prime Minister Theresa May released a framework for the upcoming Brexit negotiations, which begin in March. Meanwhile, economic data was promising as January’s PMIs showed gains in manufacturing and services. The Bank of England— encouraged by better-than-expected economic conditions since the Brexit referendum—left interest rates unchanged and upgraded its GDP forecast.
In Asia, Chinese January services and manufacturing PMIs beat expectations. Japan’s December unemployment rate remained at 3.1%, while real wages grew 2.3% y/y. December industrial production topped estimates, increasing 3.0% y/y. Construction orders rebounded, rising 7.1% y/y. The Bank of Japan left interest rates unchanged and modestly upgraded its economic projections.
The Week Ahead:
Many developed countries release trade data next week. The US reports inventory and energy production data, while the UK gives updates on home prices and industrial output. Little economic data is expected from Europe. China and Japan both report money supply 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.