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On 01 July 2019 - US, Europe, Asia up on US-China trade relief

Anne D Picker

Anne D Picker - Econoday

US shares retreat from highs late in day as caution returns.

US markets

US stocks rose Monday on relief over the weekend’s truce in the US-China trade war with trade-sensitive tech shares leading the way, but many stocks retreated from early highs as trade uncertainty lingered.

The US and China agreed to resume trade talks, the US agreed not to impose new tariffs and to ease restrictions on Huawei, and China agreed to buy US farm products. There was little clarity on the elements of a possible final deal on trade.

The Dow industrials rose by 0.4 percent; the S&P 500 rose 0.8 percent, and the NASDAQ gained 1.1 percent.

The Dow was held back by a 2.3 percent drop in Boeing on worries about another Boeing aircraft, the 787 Dreamliner which reports say is now, like the 737 Max, also the subject of a government safety investigation. Gambling shares rose, with Wynn Resorts up 5.9 percent on news of higher-than-expected revenues from China. Coty Inc., the cosmetics company, was a big loser, down 16 percent, on news of a restructuring and write-down.

In economic news, ISM's manufacturing sample reported slowing in June but not as much as expected. The index of 51.7, after two prior months of lower-than-expected results, beat Econoday's consensus for 51.1. Nevertheless, June's level is nearly a 3-year low. In other data, construction spending fell 0.8 percent in May and was below Econoday's consensus range. Residential spending continues to be the weakest element of the report but May's data include declines for non-residential spending as well, both public and private.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude was up US$0.45 at US$65.19 while gold was down US$25.38 at $1384.12. The US dollar was higher against most major currencies. The yield on the US Treasury 30-year bond yield rose 2 basis points to 2.55 percent while the yield on the 10-year note was also up 2 basis points at 2.03 percent.

European markets

European equities tracked Asian markets higher Monday on weekend news of a truce in the US-China trade war, as sectors with heavy exposure to China, such as technology, banking, and materials, led the rally.

The European STOXX 600 rose 0.8 percent, the German DAX rose 1 percent to lead advancers, the French CAC rose 0.5 percent, and the UK FTSE 100 also gained 1 percent.

News that the US would ease restrictions on Huawei boosted tech shares, chipmakers in particular, with Infineon and Siltronic both up 3.1 percent. Mining shares such as Glencore (up 1.6 percent), and Asia-focused banks, including HSBC (up 0.8 percent) were leaders. A rally in oil prices lifted energy shares, with Royal Dutch Shell up 1 percent.

In economic news, Eurozone manufacturing performed marginally worse than originally thought in June. At 47.6, the final sector PMI was 0.2 points short of its flash estimate and 0.1 point below final May. The latest reading was in recession territory for a fifth successive month. UK manufacturers also had a poor June. At a weaker than expected 48.0, the sector PMI was down 1.4 points versus May and below the 50-expansion threshold for a second month in a row.

Asia Pacific Markets

Most major Asian markets rallied strongly on Monday after President Trump and President Xi announced at the G20 summit that they had agreed to suspend any additional tariffs and resume trade negotiations. Regional data published Monday showed further weakness in the manufacturing sector but had little impact on market sentiment. Chinese and Japanese shares advanced at a similar pace, with the Shanghai Composite index up 2.2 percent and the Nikkei and Topix indices gaining 2.1 percent and 2.2 percent respectively. Australia’s All Ordinaries index also posted a solid gain of 0.5 percent, with major mining stocks outperforming.

The Markit manufacturing PMI surveys for Asia showed a broad-based deterioration in conditions in June, with renewed US-China trade tensions widely cited as the main factor weighing on activity and sentiment. The surveys’ headline index fell from 49.8 to 49.3 for Japan,  from 50.2 to 49.4 for China, and from 52.7 to 52.1 for India. The official PMI surveys for China published over the weekend also showed the headline index was unchanged at 49.4 for the manufacturing sector and fell from 54.3 to 54.2 for the non-manufacturing sector. Also published Monday, Japan’s Tankan survey showed business sentiment weakened in the manufacturing sector but remained steady in the non-manufacturing sector in the three months to June.

The Reserve Bank of Australia will hold its monthly policy meeting on Tuesday, with the consensus forecasting that officials will cut policy rates for a second month in a row to a new record low of 1.00 percent. The minutes of the RBA’s June meeting showed that officials considered "it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.” This view was reinforced by the publication of data after the June meeting showing the unemployment rate was unchanged in May.

Looking forward

On Tuesday, the Reserve Bank of Australia monetary policy announcement is scheduled. In Europe: UK Nationwide HPI, UK PMI construction data, German retail sales, and Eurozone PPI. US motor vehicle sales figures are due.

Global Stock Markets

 

Index

1 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26717.43

117.47

0.4

 

NASDAQ

8091.16

84.92

1.1

 

S&P 500

2964.33

22.57

0.8

Canada

S&P/TSX Comp

*

*

*

Europe

 

 

 

 

UK

FTSE 100

7497.5

71.87

1.0

France

CAC

5567.91

28.94

0.5

Germany

XETRA DAX

12521.38

122.58

1.0

Italy

MIB

21254.04

19.25

0.1

Spain

Ibex 35

9264.6

65.80

0.7

Sweden

OMX Stockholm 30

1642

19.57

1.2

Switzerland

SMI

9970

71.76

0.7

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6731.38

32.21

0.5

Japan

Nikkei 225

21729.97

454.05

2.1

 

Topix

1584.85

33.71

2.2

Hong Kong

Hang Seng

*

*

*

S. Korea

Kospi

2129.74

-0.88

0.0

Singapore

STI

3372.26

50.65

1.5

China

Shanghai Comp

3044.9

66.02

2.2

Taiwan

TAIEX

10895.46

164.63

1.5

India

Sensex 30

39686.5

291.86

0.7

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

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.