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On 31 March 2020 - US slips on economic gloom; Europe firms; Asia mixed

Anne D Picker

Anne D Picker - Econoday

Goldman sees even bigger drop in US GDP

US markets

Equities gave up morning gains to end lower Tuesday amid gloomy forecasts for the US economy, including Goldman’s new prediction that GDP could drop by more than 30 percent in the second quarter, up from 20 percent in its initial estimate. Markets had been bolstered earlier by focus on the next tranche of US fiscal stimulus to include big infrastructure spending. The Dow industrials fell 1.8 percent, the S&P 500 lost 1.6 percent, and the NASDAQ was off 1.0 percent.

Real estate and utilities were the worst performers, along with banks, insurance, telecom, consumer staples, transportation, and retail, while outperformers were hotels, autos, media, metals, miners, and energy, as oil prices perked up after recent declines.

Among companies in focus, Apache, the exploration and production company, rose 1.7 percent after an upgrade from UBS. Dupont, the chemical company, gained 1.5 percent after a favorable court ruling in a dispute over environmental damage. Conagra, the food conglomerate, rose 3.9 percent after raising its guidance. On the downside, Restoration Hardware fell 15 percent after noting its stores have been closed due to the virus. Domino’s Pizza fell 7 percent after citing the impact of event cancellations and televised sports. Zoom Video fell 3.2 percent after a warning letter from the state of New York on security concerns, even as usage has surged. McCormick, the spice company, declined 1.4 percent after pulling its guidance on virus uncertainty.

In economic news, consumer confidence fell sharply but not as sharply as expected, down 12.6 points to 120.0 in March which was actually at the very top of Econoday's consensus range. Meanwhile, March's Chicago PMI came in much better than expected, at 47.8 to indicate only moderate slowing in the month of March but at a much less severe pace than Econoday's consensus for 40.0.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 9 cents to US$22.74, while gold fell US$44.33 to US$1,577.77. The US dollar was mixed against most major currencies. The US Treasury 30-year bond yield rose 1 basis point to 1.35 percent while the 10-year note yield was down 3 basis points to 0.69 percent.

European markets

Equities rose in volatile trading Tuesday after reports of slowing in new virus cases in Italy and a comment from the World Health Organization that Europe’s pandemic may be peaking. The Europe-wide STOXX 600 rose 1.7 percent, the German DAX rose 1.2 percent, the French CAC gained 0.4 percent, and the UK FTSE-100 was up 2.0 percent.

Hard-hit energy and travel & leisure stocks were among Tuesday’s best performers, along with basic resources, media, construction, autos, insurance, and real estate. Laggards included telecom, banks, utilities, personal and household goods, technology, food, and retail.

On the company news front, HelloFresh, the German supermarket, rose 8.7 percent on strong first-quarter guidance. Amoeba, the French pharma, rocketed 132 percent on news of a partnership with BASF. Verona, the UK biopharma, rose 12 percent on positive results from its ensifentrine medicine.

In economic data, Eurozone inflation provisionally decelerated again, and sharply, in March. At just 0.7 percent, the flash annual rate was down 0.5 percentage points from February's final 1.2 percent, equaling its lowest level since November 2016. Separately, the German labor market remained unexpectedly firm in March. Following an 8,000 decline in February, the number of people out of work rose just 1,000 to 2.267 million. As a result, the unemployment rate was again unchanged at 5.0 percent, a tick below the market consensus.

Asia Pacific markets

Major Asian markets posted mixed results Tuesday, with incoming data driving some of this price action. The Shanghai Composite index closed marginally higher, up 0.1 percent, after official PMI manufacturing survey data rebounded strongly in March, while Hong Kong’s Hang Seng index was among the stronger performers in the region, closing up 1.9 percent. Japan’s Nikkei and Topix indices, however, fell 0.9 percent and 2.3 percent respectively after data showed weaker conditions in the labour market and the manufacturing sector. After surging Monday, Australia’s All Ordinaries index gained early in the session but closed down 1.6 percent.

Chinese PMI survey data suggest that economic activity has bounced back in March after collapsing in February. China's CFLP Manufacturing PMI increased from a record low of 35.7 in February to 52.0 in March (50 indicates no change in monthly composite activity), while the non-Manufacturing PMI index increased from a record low of 29.6 to 52.3. Non-official Markit PMI surveys for the manufacturing and services sectors will be published in the next few days and will be watched closely to see if they provide supporting evidence of this improvement in conditions.

Japanese data for February published Tuesday provided evidence of the initial impact of the global coronavirus pandemic on the domestic economy. The unemployment rate was steady at 2.4 percent in February, but employment growth slowed sharply and the number of unemployed workers increased. The index of industrial production, which had already indicated weakness in the manufacturing sector before the onset of the pandemic, showed weaker growth in February, rising 0.4 percent on the month after an increase of 0.8 percent previously. In line with PMI survey data, officials forecast a sharper drop in March but then a rebound in April. Retail sales, however, strengthened in year-on-year terms from a decline of 0.4 percent to an increase of 1.7 percent in February.

Looking forward

On Wednesday in Asia/Pacific, Japan PMI manufacturing, China PMI Caixan manufacturing, Japan BOJ tankan, and Australia RBA meeting minutes are due. In Europe, UK Nationwide HPI, German retail sales, Swiss PMI manufacturing, French PMI manufacturing, German PMI manufacturing, Eurozone PMI manufacturing, UK PMI manufacturing, and Eurozone unemployment figures are scheduled. In US data, ADP employment, PMI manufacturing, ISM manufacturing, and construction spending reports are on tap.

Global stock markets

 

Index

31 Mar 2020

Daily Change

% Change Daily

North America

United States

Dow

21917.16

-410.32

-1.8

 

NASDAQ

7700.1

-74.05

-1.0

 

S&P 500

2584.59

-42.06

-1.6

Canada

S&P/TSX Comp

13378.75

340.25

2.6

Europe

UK

FTSE 100

5671.96

108.22

2.0

France

CAC

4396.12

17.61

0.4

Germany

XETRA DAX

9935.84

119.87

1.2

Italy

MIB

17050.94

178.53

1.1

Spain

Ibex 35

6785.4

125.50

1.9

Sweden

OMX Stockholm 30

1482.43

33.23

2.3

Switzerland

SMI

9311.92

137.53

1.5

Asia/Pacific

Australia

All Ordinaries

5110.56

-83.39

-1.6

Japan

Nikkei 225

18917.01

-167.96

-0.9

 

Topix

1403.04

-32.50

-2.3

Hong Kong

Hang Seng

23603.48

428.37

1.9

S. Korea

Kospi

1754.64

37.52

2.2

Singapore

STI

2481.23

64.99

2.7

China

Shanghai Comp

2750.3

3.09

0.1

Taiwan

TAIEX

9708.06

78.63

0.8

India

Sensex 30

29468.49

1028.17

3.6

Note: all releases are listed in local time.

Important Information

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.