Ongoing US-China trade disputes have coincided with an African Swine Fever outbreak and soaring pork prices in China. Behind the headlines, we see a story of the rising emerging market (EM) consumer. Population growth and rising income are driving Chinese consumer former luxuries like pork into dietary staples. We think global consumption growth may be driven disproportionately by EM economies in the future, creating potential opportunities for companies and investors.
Global equities had a volatile week as trade tensions continued to stay top-of-mind for investors. The S&P 500 closed down 0.7% as risk-on sentiment returned mid-week to help notch a three-day winning streak, its first this month, and mostly reversing a weak start that saw its largest one-day fall this year on Monday. The FTSE 100 saw a similar rebound as strong Euro area growth data and demand for financial and mining stocks drove the index up 2.3%, despite the sudden collapse of Brexit talks. Read More
Supply pressures continued to support oil prices this week, with WTI and Brent up 1.8% and 2.3%, respectively. Investors continue to watch for potential further supply disruptions amongst contaminated oil in Russia, US sanctions on Iran and Venezuela, and geopolitical instability in the Middle East, all of which have countered any downside risks to demand. Read More
Global yields largely retreated for the second consecutive week, ignited by investor fear of tit-for-tat trade retaliation between China and the US. The 10-year Treasury saw its best week in almost two months, with yields down 6 bps, as demand surged for safe-haven assets. Japanese JGBs and German Bunds followed a similar path, with Bund yields touching a three-year low, as concerns of an European slowdown intensified after renewed focus on Italy’s fiscal debt. Read More
A combination of strong US economic data, postponed auto tariffs, and increased uncertainty in Europe led to the US dollar index rallying 0.8%, nearing a two-year high. The British pound depreciated against the USD by 2.2% as Brexit talks collapsed between the UK’s two major parties. The euro also declined over the week ending down 0.6% against the USD, as concerns intensified over a global economic slowdown. Read More
April’s US industrial production fell -0.5% month-over-month (MoM), reflecting weakness in factory outputs. Meanwhile, the Philly Fed Index demonstrated continued strength in May at 16.6, beating consensus of 9.0, supported by shipments and employment. Euro area industrial production fell MoM by -0.3% in March, in line with expectations, driven by a decline in the production of non-durable consumer goods and energy. In China, industrial production rose +5.4% year-over-year in April, down from +8.5% in March and below consensus of +6.5%, slowed by manufacturing and mining. Read More
China retail sales in April hit a 16-year low, at 7.2% year-over-year, below consensus expectations of 8.6%, reflecting a sharp drawback in momentum after government stimulus efforts in 1Q front-loaded economic growth. Read More
The University of Michigan’s Consumer Sentiment Survey printed at 102.4 for early May, its highest level since 2004 and well-above consensus expectations of 97.2. However, this rebound may be short-lived, as most responses were recorded prior to recent trade war escalation. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
UK CPI YoY (Cons: 2.20%, Prior: 1.90%)
US Manuf. PMI (Cons: 53, Prior: 52.6)
Euro area PMI (Cons: 51.8, Prior: 51.5)
Japan Core CPI YoY (Cons: 0.90%, Prior: 0.80%)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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