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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

European Manufacturers on a Tear on Weaker Euro

May 8, 2017

European Manufacturers on a Tear on Weaker Euro

At the start of the second quarter, the eurozone’s manufacturing sector grew at its fastest pace in six years, climbing from 56.2 in March to 56.7 in April and marking the eighth straight month of expansion. Of the eight eurozone countries that IHS Markit surveys, only Greece failed to show any improvement during the month.

Growth was spurred by new orders, output and job creation, and companies are benefiting from both the historically weak euro and the European Central Bank’s ongoing stimulus, including low interest rates. Factory jobs are currently seeing one of their strongest upticks in the survey’s 20-year history.

Ahead of France’s presidential election this past weekend—polls heavily favored the victor, 39-year-old Emmanuel Macron, over far-right candidate Marine Le Pen—the country showed impressive momentum, rising from 53.3 in March to 55.1 in April. New orders grew at their sharpest pace in six years. Meanwhile, the United Kingdom’s manufacturing sector continued to expand post-Brexit, rising to a three-year high of 57.3.

manufacturing in major economies continues to expand
click to enlarge

Both the U.S. and China continued to expand at the start of the second quarter, though at a slightly slower pace than in March. U.S. manufacturing growth relaxed a little more than 2 percent, from 57.2 to 54.8, but it still remains at a high level in the six months following the presidential election. Chinese factories pumped the brakes in April, with growth slowing to a seven-month low.

Manufacturing on a global level continued to expand as well but, like the U.S. and China, at a slower pace. The index fell from 53 in March to 52.8 in April, with the one-month reading falling below its three-month moving average for the first time since April of last year. 

global PMI falls below its three-month moving average in april
click to enlarge

Like clockwork, copper and oil were off last week. As I’ve shown a number of times before, the PMI can be used as a forecast tool for commodities and natural resource prices.

Last Wednesday copper lost 3.5 percent, marking the largest single-day loss since September 2015. The red metal ended the week at $2.53 a pound. Oil tumbled nearly 5 percent on Thursday to close the trading day at $45.48, a level we haven’t seen since December. On Friday it finished above $46 a barrel.

SALT Conference

Later this month I’ll be in Las Vegas attending the annual SkyBridge Alternatives Conference (SALT), which normally attracts some of the biggest rock stars in the hedge fund and investing world. This year’s speaker lineup includes Ben Bernanke; Jeffrey Gundlach, CEO of DoubleLine; Eric Schmidt, executive chairman of Alphabet; Bill Ackman, CEO of Pershing Square Capital; and many more. It should be a highly enlightening conference, and I’ll likely have a few takeaways to share with you.

 

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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

Net Asset Value
as of 05/19/2017

Global Resources Fund PSPFX $5.38 0.03 Gold and Precious Metals Fund USERX $7.10 -0.02 World Precious Minerals Fund UNWPX $6.27 No Change China Region Fund USCOX $8.75 0.06 Emerging Europe Fund EUROX $6.38 0.11 All American Equity Fund GBTFX $24.02 0.14 Holmes Macro Trends Fund MEGAX $19.07 0.13 Near-Term Tax Free Fund NEARX $2.23 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change