US Business Activity Grew And European Exchange-Traded Fund Investment Hit New Highs

US Business Activity Grew And European Exchange-Traded Fund Investment Hit New Highs

over 3 years ago3 mins

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Fresh survey data out on Monday showed that while US business activity grew at its fastest rate in over five years in November, Europe’s dropped to a six-month low 📊

What does this mean?

These monthly business activity surveys ask business managers how busy they’ve been compared to the month before, which means they give investors a more up-to-date idea of how the economy’s doing than backwards-looking data like, say, economic growth.

IHS Markit eurozone PMI and GDP

US business activity – which jumped by more than expected – put the country squarely in expansion territory, but both the eurozone’s and the UK’s suggested they’re on track for a “double-dip” recession – or two periods of economic shrinkage separated by a brief expansion 🗺 The main difference between the two sides of the Atlantic was in how their services industries – everything from hospitality to accountancy – have performed: America’s rose to its highest level since March 2015, even as the eurozone’s shrank for a third month in a row.

US business activity expands most since 2015

Why should I care?

It’s not all bad news for Europe: the part of the survey that gauges confidence in future economic output jumped to its highest level since February. That might have something to do with all the promising vaccine announcements – the latest coming from AstraZeneca on Monday 💉 – and investors’ expectations that the European Central Bank will pump more money into the economy. The mood’s high further afield too: British and American business managers haven’t been this optimistic in five and six years respectively.

Thing is, this strong US report is at odds with some other measures of the country’s economy 🇺🇸 Retail sales data came in below expectations last week, while the number of workers filing for unemployment claims has picked up for the first time in a month. So this is when a conclusive verdict from backwards-looking data might come in handy…

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European Exchange-Traded Fund Investment Hit New Highs

ETF flows image

How’s that for an effective vaccine: investments in exchange-traded funds (ETFs) in Europe reached their highest levels since December 2019 on Monday 🇪🇺

What does this mean?

Investors have been celebrating the good news about potential coronavirus vaccines by loading up on stocks, and boy have they been celebrating: ETFs in Europe that track the value of stocks raked in $6 billion worth of investments last week – by far the most in 2020.

ETFs have kicked off in the US too: investors have put over $400 billion into them so far in 2020, compared to just under $250 billion at the same time last year 💵 That brought the amount invested in ETFs as a whole to a record-breaking $5 trillion earlier this month, partly thanks to the prospect of an end to – *gestures wildly* – all this.

Why should I care?

Don’t get too comfortable, warns JPMorgan: the investment bank said late last week that it’s expecting investors to sell $300 billion worth of global stocks by the end of the year 🌎 Stock markets did so well in November, after all, that it thinks investment managers will rebalance their portfolios – that is, sell stocks and buy bonds to keep their risk in check. And when that happens – by the end of December at the latest, JPMorgan reckons – it could trip up the stock market’s climb higher.

Goldman Sachs, for its part, reckons stocks are more attractive than bonds despite November’s move higher, especially if JPMorgan is right about their short-term prospects 🤔 It’s particularly keen on stocks outside the US like Europe, Japan, and emerging markets: they’re lagging behind right now, but the company thinks they’ll catch up over the next three months. Beyond that, the company doesn’t have a preference on region: it thinks they’ll all be looking good a year from now.

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