Global Markets Climb on Upbeat Macro Data

Global equity markets climbed in recent trading action.

Economic data released throughout the world helped to spur major equity indexes.

With that backdrop, the S&P 500 hit a new all-time high and hasn’t stopped.

As the data below show, the global numbers are picking up:

  • In Japan, the Nikkei posted solid gains. This growth was aided by weakness in the yen against the dollar, which depreciated throughout the past Japanese trading week. The stock gains were supported by another solid set of figures that signal signs of domestic recovery. The final May reading of Japan’s Manufacturing PMI was revised up to 53.1 from a preliminary figure of 52.0. In addition, first-quarter capital spending showed better-than-expected growth of 4.5% to finish 50 basis points (bps) better than consensus estimates.
  • In contrast, China has been trading down recently. Mainland traders sang a different tune than their Japanese counterpart after the Caixin Manufacturing PMI not only fell short of expectations, but signaled contraction, with a print of 49.6 vs a 50.1 estimate. This shortfall is notable, since the state-issued PMI suggested an opposite appraisal of the economy (May PMI: 51.2 vs 51.0). The dichotomy likely left traders baffled after the release of the data, wondering which release gives the best assessment of conditions.
  • Elsewhere, the major European Union bourses got off to a strong in early June and have managed to sustain those gains thus far. Energy companies are among those catching a bid from investors in tandem with Crude futures, which are rebounding from a recent slide. Also supporting equities in Europe was the mostly-better-than-expected macro-data across the region, led by a slight upward revision in Germany’s Manufacturing PMI to 59.5 from 59.4 preliminary, as well as a higher-than-expected gross domestic product (GDP) in Italy, which grew 1.2% versus an estimate of 0.8%.

After rising 3.1% in 2016, global growth is set to reach 3.5% this year and 3.6% in 2018, according to the International Monetary Fund (IMF). The IMF has raised its growth forecasts slightly from estimates released last October, as macroeconomic conditions eased for commodity exporters and investment levels grew in advanced economies.

I expect the IMF will continue to raise its estimates this year and markets should respond positively when the numbers are adjusted higher. Let’s remember this comes without any of President Trump’s agenda getting passed into law or implemented.

With so much focus on the U.S. economy, it is a good to observe foreign developed country economies gain structurally. That situation has been a long time coming.

With the seeds of future growth getting sown by massive fiscal stimulus, there is an organic earnings recovery in the offing, just like in the United States.

What is so inspiring about the “global reflation trade” is that more than 60% of the revenues generated by the companies that make up the S&P 500 are from overseas sales. As a result, expect upward earnings revisions for many of the multi-national corporations this year.

Dividend investors have a plethora of American Depository Receipts (ADRs) trading on the NYSE that sport 4-6% yields from established companies that have been in a bear market for 10 years.

Some companies already have made solid moves higher, while others are trading at steep discounts to book value and to their American peers. My high-yield, dividend-driven investment newsletter, Cash Machine, is sorting through which names in the field have the most potential for total return.

Since ADRs need to conform to stringent listing requirements of the NYSE, investors have little to worry about as far as accounting irregularities and transparency of each business.

Plus, investors get more news and updates on these companies because money managers tend to be the biggest buyers of these stocks. To find out more about getting in on the global reflation trade and Cash Machine, click here to learn why thousands of income investors subscribe to obtain their income investing strategies.

Until next time,

Bryan Perry

 Bryan Perry has spent more than 20 years working as a financial adviser for major Wall Street firms, including Bear Stearns, Paine Webber and Lehman Brothers. Bryan co-hosted weekly financial news shows on the Bloomberg affiliate radio network, and he’s frequently quoted by Forbes, Business Week and CBS’ MarketWatch. With three decades of experience inside Wall Street, Bryan has proved himself to be an asset to subscribers who are looking to receive a juicy check in the mail each month, quarter or year. Bryan’s experience has given him a unique approach to high-yield investing.