International Economic Week In Review For August 27-31
Hale Stewart | Sep 01, 2018 11:38PM ET
The news was generally positive: Canada's GDP growth was up, and the EU's expansion continues.
Japanese news was mixed.
There is a strong divergence between the US and other global equity markets.
Canada released its latest quarterly GDP report. Headline Q/Q growth was .7%, double the .3% 1Q rate. Household spending, which, like most developed countries, accounts for the bulk of the country's growth, was up .6%. Gains occurred in all the major consumer spending categories. While business investment decelerated from its first-quarter pace, it was still positive. Non-residential investment increased .5%, machinery investment advanced .3%, and intellectual property spending was .2% higher. Exports advanced a very strong 2.9%. It's likely that imposition of tariffs caused orders to be pulled forward. Overall, Canada has emerged from its 2014-2015 slowdown:
In other news, the current account was -$1.6 billion . Canada has a current account deficit, which has fluctuated between -$10 and -$20 billion for the last five years:
EU news was positive. Loan growth was stable: household loan growth was 3% while non-financial loans were 4.1%:
The unemployment rate held steady at 8.2% (It's important to remember this is an average of nearly 20 countries). Eurostat projected inflation at 2%:
Core prices remain contained; they haven't moved above .4% in the last six months. This news will likely support the ECB's decision to remove fiscal accommodation this fall.
Japanese news was mixed. Industrial production declined for the third consecutive quarter, this time moving .1% lower (it was down .2% and 1.8% in the two preceding months, respectively). However, IP was still up 2.3% Y/Y. The unemployment rate remains shockingly low at 2.5%:
But despite this, inflation is still very low. Finally, retail sales were up .1% M/M and 1.5% Y/Y.
Turning to global equity markets, we still have a large divergence between the U.S. equity markets and the rest of the world:
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The above group of charts shows the ETFs that cover most of the major global markets. With the exception of the SPYs (lower row, far right) and Australia (top row, second from the left), everybody is either moving sideways or is near 52-week lows. And when it comes to the relative performance, most are underperforming the SPYs:
The only ETFs that are improving are iShares MSCI Brazil Capped (NYSE:EWZ), iShares Latin America 40 (NYSE:ILF), and OTCPK:INPTF. All others are weakening.
When we look at the major regions of the world, the underperformance continues, starting with Asia:
None of the ETFs that track the major Asian indexes are performing well. Some are near yearly lows while others are in the middle of their respective 52-week ranges. India (bottom left) has a short-term rally as does Taiwan (middle row, second from the left). But there's not a lot of good news above.
We see the same problem in Europe:
None of the markets of the major economies nor the region as a whole (the IEVs, bottom right) is in an uptrend. However, there are a number of issues in the middle of their yearly ranges or at lows.
We see the exact same situation in Latin America:
This divergence between the U.S. and every other region could be a problem come the fall.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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