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On 31 January 2019 - Global stocks mixed ahead of US employment report

Anne D Picker

Anne D Picker - Econoday

Facebook and General Electric surge after fourth-quarter reports; European banks and Samsung underperform.

US markets

US stocks were mixed Thursday, with the Dow little changed but strong gains from General Electric and Facebook providing much of the momentum for the S&P and Nasdaq. The Dow closed the day down 0.1 percent, underperforming gains of 0.9 percent for the S&P and 1.4 percent for the Nasdaq.

General Electric surged after reporting stronger-than-expected fourth-quarter revenue. Although earnings per share of US$0.17 fell short of expectations of US$0.22, the company’s efforts to reduce debt and re-structure its business appear to have boosted investor sentiment. The company also reported it had reached a settlement with the Department of Justice in relation to historical misconduct by its now-defunct subprime mortgage business.
 
Facebook also closed sharply higher on Thursday after reporting record profits in the fourth quarter, with earnings per share of US$2,38 comfortably beating analysts’ expectations of US$2.19. Despite concerns about security and privacy, the company reported solid growth in users and advertisers and higher average revenue per user. 

US-China trade negotiations continued in Washington DC on Thursday. President Trump has indicated that he will meet President Xi “in the near future” and hopes to resolve outstanding issues before the scheduled increase in tariff rates on Chinese goods from 10 percent to 25 percent at the start of March.

US personal income and outlay data scheduled for release Thursday were delayed as officials resume operations after the government shutdown. The Challenger job-cut report showed an increase in announced layoffs in January, largely driven by the liquidation of a major chain of apparel retailers. Jobless claims for the January 26 week were also above consensus at 253,000, up from 200,000 the previous week, though this number will not impact the January employment report scheduled for release Friday. 

Monthly GDP data indicate that Canada’s economy contracted for the second time in three months in November, down 0.1 percent on the month, with year-on-year growth slowing from 2.2 percent to 1.7 percent. Activity contracted in the manufacturing, energy and wholesale trade sectors and was flat in the services sector. Today’s data suggests quarterly GDP growth for the three months to December may fall short of the Bank of Canada’s forecast of 1.3 percent. The BOC also expects growth to weaken further in the three months to March, with Senior Deputy Governor Carolyn Wilkins today pointing to “a challenging start” to 2019 for the domestic economy.

These data reflect observations at 4:00 PM US ET. Gold gained US$9.50 to US$1,325.00 and dated Brent spot crude was up US$0.24 to US$61.90. Currency moves were subdued, with the US dollar up moderately against the euro, flat against the Swiss franc, and slightly weaker against other major currencies. The yield on the US Treasury 30 year bond fell 4 basis points to 3.00 percent while the 10 year note fell 5 basis points to 2.62 percent.

European markets

European markets were little changed on Thursday. The FTSE and CAC closed 0.4 percent higher, Switzerland’s SMI was flat on the day, and the DAX fell 0.1 percent. Regional banks were among the weaker performers on the day after the European Commission announced that it is investigating eight banks for their involvement in alleged collusive activity in the Eurozone sovereign bond market. Officials did not identify which banks are being investigated. 

Eurozone flash GDP data confirmed weak economic growth at the end of the last year, reinforcing the European Central Bank’s ECB's decision to acknowledge downside risks to its economic projections. The regional economy expanded 0.2 percent on the quarter in the three months to December, matching the rate recorded in the three months to September and the consensus forecast, with year-on-year growth dropping from 1.7 percent to a five-year low of 1.2 percent. The Eurozone unemployment rate was steady at 7.9 percent in December, while the German unemployment rate was unchanged at 5.0 percent in January. Provisional French CPI data showed a fall in headline inflation from 1.6 percent in December to 1.2 percent in January, matching the lowest level seen since October 2017. With today’s data consistent with other indicators pointing to subdued activity and price pressures, further moves by the ECB to ease policy look increasingly likely.

Asia Pacific Markets

Most Asian markets advanced Thursday after the Federal Reserve’s guidance that it will be “patient” about raising policy rates further. Hong Kong’s Hang Seng index closed 1.1 percent higher, as did Japan’s Nikkei and Topix, while Singapore’s STI gained 0.5 percent and the Shanghai Composite index rose 0.3 percent. Korea’s KOSPI index and Australia’s All Ordinaries index, however, both posted moderate declines. The KOSPI’s underperformance reflected a drop in Samsung after the tech firm reported a fall in operating profit in the fourth quarter. The company also expects weaker earnings in 2019.

China's CFLP Manufacturing PMI headline index picked up slightly from 49.4 in December, its lowest level since mid-2016, to 49.5 in January. Despite this small increase, the index indicates that the sector contracted for a second consecutive month, in line with other data showing weaker economic activity. Conditions in the services sector, however, appear stronger, with the CFLP Non-Manufacturing PMI headline index advancing from 53.8 in December to 54.7 in January. Preliminary data for December showed that Japan's industrial production index fell 0.1 percent on the month (seasonally adjusted) after falling 1.0 percent in November. 

Bank of Japan Deputy Governor Masayoshi Amamiya spoke Thursday and warned that officials must pay close attention to the side effects of persistent monetary policy stimulus, noting in particular the impact of low interest rates on financial institutions’’ profitability and capacity to extend credit. However, he provided no indication that he and his colleagues see any case for policy settings to be adjusted in the foreseeable future, pointing out that downward pressures on consumer prices may last longer than currently expected.

Looking forward

Amazon reports fourth-quarter earnings shortly. PMI surveys will be published around the globe over the next 24 hours, starting with Japan, China and India, followed by major European economies, and then finishing with the United States, including the ISM manufacturing index. The US employment report for January however will be the main highlight of the data calendar, with the consensus range calling for an increase in non-farm payrolls of between 140,000 and 183,000. Dallas Fed President Robert Kaplan is scheduled to speak after the employment report. 

Global Stock Markets

 

Index

Jan 31 2019

Daily Change

% Change Daily

North America

United States

Dow

24999.67

-15.19

-0.1

 

NASDAQ

7281.74

98.66

1.4

 

S&P 500

2704.10

23.05

0.9

Canada

S&P/TSX Comp

15540.60

56.05

0.4

Europe

UK

FTSE 100

6968.85

27.22

0.4

France

CAC

4992.72

17.96

0.4

Germany

XETRA DAX

11173.10

-8.56

-0.1

Italy

MIB

19730.78

-40.77

-0.2

Spain

Ibex 35

9056.70

-14.80

-0.2

Sweden

OMX Stockholm 30

1515.42

5.92

0.4

Switzerland

SMI

8969.27

3.56

0.0

Asia/Pacific

Australia

All Ordinaries

5937.28

-13.88

-0.2

Japan

Nikkei 225

20773.49

216.95

1.1

 

Topix

1567.49

16.73

1.1

Hong Kong

Hang Seng

27942.47

299.62

1.1

S. Korea

Kospi

2204.85

-1.35

-0.1

Singapore

STI

3190.17

15.79

0.5

China

Shanghai Comp

2584.57

8.99

0.3

Taiwan

TAIEX

*

*

*

India

Sensex 30

36256.69

665.44

1.9

* Market closed
Source: Haver Analytics

Note: all releases are listed in local time.

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Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.