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On 1 April 2019 - Global stocks advance on positive Chinese and US data

Anne D Picker

Anne D Picker - Econoday

UK parliament rejects a new round of Brexit options.

US markets

US stocks advanced Monday after a busy US data calendar showed signs of improvement in the manufacturing sector and upward revisions to key expenditure items. Chinese data had earlier shown a strong rebound in its manufacturing sector. The Dow closed up 1.3 percent on the day, the S&P rose 1.2 percent, and the Nasdaq gained 1.3 percent. Trade-sensitive stocks, including Caterpillar and Boeing, were among the strongest performers in the Dow Monday.

ISM and PMI surveys provided somewhat different signals about US manufacturing conditions in March. The ISM Manufacturing Index increased from 54.2 to 55.3, above the consensus forecast of 54.2, with the survey’s measures of output, new orders and employment all up from February levels, offset by a drop in its measure of new export orders. Better conditions were reported in 16 of 18 industries surveyed. The PMI Manufacturing Index, however, fell from 53.0 to 52.4, just below the flash estimate of 52.5 and the lowest level since mid-2017. Respondents to this survey reported flat new export orders and weaker growth in output and new orders, but strong hiring and business confidence. 

Retail sales data published Monday showed a fall in February but upward revisions to January. Sales fell 0.2 percent on the month in February but the increase in January was revised up from 0.2 percent to 0.7 percent, indicating that consumer spending has picked up early in the year after weakness during the late-2018 holiday season. Higher spending on autos and gas helped to limit the month-on-month decline in headline sales in February, with spending on other categories generally weak. Excluding autos, sales fell 0.4 percent on the month in February, while excluding autos and gas, sales fell 0.6 percent. An alternative measure of core retail sales, the control group, fell 0.2 percent on the month but its increase in January was revised up from 1.1 percent to 1.7 percent, indicating that consumer spending may make a solid contribution to first-quarter GDP.

Construction spending rose 1.0 percent on the month in February, with January growth revised up from 1.3 percent to 2.5 percent. Public spending drove the headline growth, with residential spending falling on the month, and nonresidential private spending flat. Business inventories rose 0.8 percent on the month in January, with the increase in December revised up from 0.6 percent to 0.8 percent. This increase in inventories is broad-based and exceeds growth in underlying sales, up 0.3 percent in January after falling 0.9 percent in December, suggesting that businesses may need to curb output and hiring in coming months.

These data reflect observations at 4:00 PM US ET. Gold fell US$6.90 to US$1,291.60 while dated Brent spot crude rose US$1.51 to US$69.09. The US dollar rose against the Swiss franc, the yen, and the euro, was flat against the yuan, and fell against the pound, the Australian dollar, and the Canadian dollar. The yield on the US Treasury 30-year bond rose 8 basis points to 2.89 percent and the yield on the 10-year note rose 9 basis points to 2.50 percent.

European markets

European markets closed higher Monday, with investor sentiment buoyed by strong Chinese data despite the publication of generally weak Eurozone data. The FTSE underperformed with an increase of 0.5 percent as Brexit uncertainty continues, the CAC rose 1.0 percent, and the DAX outperformed with an increase of 1.4 percent. Auto stocks posted solid gains, led by Peugeot and Fiat Chrysler on reports that the two companies are discussing a partnership in their European operations. 

The United Kingdom parliament voted late Monday on a new round of Brexit proposals from legislators but none secured the support of a majority. The UK is currently set to exit the European Union on April 12.

Regional manufacturing PMI surveys were the main focus of the European data calendar Monday. The Eurozone survey’s headline index fell from 49.3 in February to 47.5 in March, below the flash estimate of 47.6, indicating contraction in the sector for a second consecutive month, and taking the index to its lowest level in nearly six years. Germany was again the major contributor to this weakness, with its index falling from 47.6 to 44.1, well down on the flash estimate of 44.7 and the lowest level in more than six years. The French manufacturing PMI also showed weaker conditions, with its headline index falling from 51.5 in February to 49.7 in March, just below the flash estimate of 49.8 and indicating contraction in the sector for the second time in the last four months. Both the German and French surveys indicated price pressures remained subdued in the sector, as did the Eurozone survey. The UK’s manufacturing PMI survey, in contrast, indicates that conditions in the sector remain surprisingly buoyant, with the headline index increasing from 52.0 in February to 55.1 in March, well above consensus expectations and the highest level in thirteen months.

Eurozone data showed the region’s unemployment rate was steady at 7.8 percent in March, matching the lowest reading since October 2008. The rate fell in Germany, France and Spain but rose in Italy. The flash estimate for HICP inflation for the Eurozone in March was 1.4 percent, down from 1.5 percent in February, while the underlying measure fell from 1.0 percent to 0.8 percent, matching the weakest reading since April 2018. Today’s activity and price data will likely reinforce concerns that the price stability goals of the European central Bank are not attainable under its current policy stance and that more substantial adjustments will be required.  

Asia Pacific Markets

Asian markets advanced Monday after PMI surveys showed conditions in the Chinese manufacturing sector improved in March. The Shanghai Composite index led this rally, up 2.6 percent on the day, with Hong Kong’s Hang Seng index also posting a strong 1.8 percent increase. Although Japanese data Monday were mixed, Japanese shares rose on hopes that stronger Chinese growth will provide a boost to domestic exporters, with the Nikkei and Topix indices up 1.4 percent and 1.5 percent respectively. Solid gains were also recorded in Korea and Singapore, but markets underperformed in Australia, India and Taiwan.

The PMI survey for the Chinese manufacturing sector indicates that activity in the sector expanded in March after contracting for three months in a row, with the headline index increasing from 49.9 to 50.8. Respondents reported output grew at the fastest pace since August 2018 and that employment in the sector rose for the first time since October 2013. The survey's measures of new orders and new export orders also indicated modest growth in March, with its measure of business confidence increasing a ten-month high. Respondents also reported that their input costs rose for the first time in four months and that they increased their selling prices for the second month in a row. The increase in the Caixin manufacturing survey's headline index is in line with the official CFLP Manufacturing PMI - released over the weekend - which showed its headline index picked up from 49.2 to 50.5.

Japanese data published Monday were mixed. The Tankan survey of Japanese firms showed sentiment deteriorated in the manufacturing sector in the three months to March but was steady in the non-manufacturing sector. Manufacturers, however, reported that they plan to increase their investment spending over the next fiscal year, whereas non-manufacturing firms expect their investment spending to contract. The PMI survey for the Japanese manufacturing sector showed a small increase in its headline index in March but also indicated contraction in the sector for a second consecutive month.

Looking forward

The Reserve Bank of Australia is expected to leave policy rate unchanged at its meeting Tuesday. The PMI survey for the UK construction sector and Eurozone producer price inflation data are the highlights of the European data calendar Tuesday, followed by durable goods orders and the Redbook survey in the US.

Global Stock Markets

 

Index

Apr 1 2019

Daily Change

% Change Daily

North America

United States

Dow

25928.68

26258.42

329.7

 

NASDAQ

7729.32

7828.91

99.6

 

S&P 500

2834.4

2867.19

32.8

Canada

S&P/TSX Comp

16102.09

16228.06

126.0

Europe

UK

FTSE 100

7279.19

7317.38

38.2

France

CAC

5350.53

5405.53

55.0

Germany

XETRA DAX

11526.04

11681.99

155.9

Italy

MIB

21286.13

21520.25

234.1

Spain

Ibex 35

9240.3

9341.70

101.4

Sweden

OMX Stockholm 30

1553.42

1580.33

26.9

Switzerland

SMI

9477.84

9538.11

60.3

Asia/Pacific

Australia

All Ordinaries

6261.73

6299.68

38.0

Japan

Nikkei 225

21205.81

21509.03

303.2

 

Topix

1591.64

1615.81

24.2

Hong Kong

Hang Seng

29051.36

29562.02

510.7

S. Korea

Kospi

2140.67

2168.28

27.6

Singapore

STI

3212.88

3250.51

37.6

China

Shanghai Comp

3090.76

3170.36

79.6

Taiwan

TAIEX

10641.04

10642.63

1.6

India

Sensex 30

38672.91

38871.87

199.0

Source: Haver Analytics

Note: all releases are listed in local time.

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