Skip Header

On 01 October 2019 - Global shares: US, Europe off on weak manufacturing data; Asia better

Anne D Picker

Anne D Picker - Econoday

Export orders pull US manufacturing ISM into recession territory.

US markets

US equities dropped Tuesday as weak US manufacturing purchasers’ data fed worries about recession, after similar weak data overseas. The Dow industrials fell 1.3 percent, the S&P 500 declined 1.2 percent, and the NASDAQ was off 1.1 percent.

All sectors of the S&P 500 were lower including industrial conglomerates, transports, chemicals, online brokers, banks, autos, and energy. Holding up better were tobacco, retail, utilities, and waste management.

Among companies in focus, fee cuts led by online brokerage Charles Schwab (down 9.7 percent) spurred losses in the sector, with E*Trade the hardest hit, down 16.4 percent. Semiconductor maker Xilinx dropped 4.0 percent after an analyst downgrade. McCormick, the spice company, rose 6.8 percent after beating earnings estimates and raising guidance. United Technologies, the aerospace conglomerate, fell 2.7 percent despite winning a huge new US Air Force contract.

In US economic news, contraction in export orders is severe and is pulling composite activity for ISM manufacturing's sample under water. September's 47.8 headline is more than 1 point under Econoday's consensus. And bleeding at a troubled rate are new export orders which at 41.0 posted their the third straight month of contraction that echoes the substantial contraction in the PMI manufacturing sample in Germany. Total new orders in September's report are at 47.3 and also well below breakeven 50 to indicate outright monthly contraction.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil fell US$1.77 to US$58.98, while gold rose by US$13.80 to US$1,486.70. The US dollar fell against most major currencies. The US Treasury 30-year bond yield fell 1 basis points to 2.10 percent while the 10-year note yield fell 3 basis points to 1.64 percent.

European markets

European equities fell Tuesday as economic data fanned worries about a global slowdown. The Europe-wide STOXX 600 and the German DAX both fell 1.3 percent, the French CAC fell 1.4 percent, and the UK FTSE-100 was off 0.7 percent.

European purchasing managers data were weak as expected but US ISM manufacturing data surprised to the downside, and the market was obliged to reconsider the US economic resilience story. UK markets outperformed as sterling fell ahead of UK Prime Minister Boris Johnson’s proposed next steps in the Brexit crisis. Asia-oriented stocks were hit by news that a Hong Kong protester had been shot by police, a first since the massive protests began months ago.

Among shares in the Stoxx 600, outperformers included defensive sectors such as utilities and real estate, plus oil & gas, and construction and materials, while underperformers included financial services, health care, banks, and industrial goods & services. Deutsche Post, the German package delivery powerhouse, fell 3.9 percent on poor results. Ferguson, the UK plumbing company, rose 3.6 percent after an earnings beat and favorable guidance. Greggs, the UK bakery chain, dropped 12.5 percent on rising ingredients costs, and said it was stockpiling bacon ahead of Brexit.

In economic data, final PMI survey data reinforced a miserable picture of Eurozone manufacturing at quarter-end. At 45.7, the headline index was just 0.1 point stronger than its flash reading and 1.3 points short of its final reading in August. Additionally, German manufacturing is deep in recession, according to the final PMI results for September. The flash index was revised up 0.3 points but, at 41.7, was still some 1.8 points below its final August reading and 8.3 points short of the 50-expansion threshold. On the inflation front, Eurozone inflation dipped last month. At a 0.9 percent annual rate, the flash estimate was a tick below August and on the soft side of market expectations. However, the deceleration in the headline rate was not mirrored in the core measures. Hence, excluding energy, food, alcohol and tobacco, inflation edged 0.1 percentage point firmer to 1.0 percent, its fifth consecutive reading within a tight 0.8 percent to 1.0 percent range.

Asia Pacific markets

Most major Asian markets closed higher Tuesday, though markets in China and Hong Kong were closed for the start of national holidays. Australia’s All Ordinaries index advanced 0.8 percent after the Reserve Bank of Australia cut policy rates for the third time this year. Japan’s Nikkei and Topix indices gained 0.6 percent and 1.0 percent respectively, despite Tankan and PMI survey data showing weak conditions in the manufacturing sector.

The Reserve Bank of Australia cut its main policy rate by 25 basis points to a new record low of 0.75 percent at its monthly policy meeting Tuesday, in line with the consensus forecast. This follows cuts of 25 basis point rates at the RBA's meetings in May and June. Officials expressed confidence that the domestic economy had experienced a “gentle turning point” but noted that a steady unemployment rate in recent months indicated that there remained significant spare capacity in the labour market. Based on this assessment officials concluded that another rate cut was warranted in order to “provide greater confidence” that inflation will increase back to its target range of 2.0 percent to 3.0 percent. Speaking after the decision, RBA Governor Philip Lowe said that improvement towards full employment and the inflation target has been “slower than we would like” but expressed confidence that prior cuts will assist this progress.

Japanese labour market data showed conditions remained strong in August with employment growth solid and the unemployment rate unchanged at 2.2 percent. The Tankan survey showed business sentiment weakened in the manufacturing sector and remained relatively steady in the non-manufacturing sector in the three months to September. The Markit Manufacturing PMI survey for Japan also showed a fall in its headline index to 48.9 in September, in line with the flash estimate and consensus estimate, confirming a small drop from the revised estimate of 49.3 in August and indicating contraction in the sector for the fifth consecutive month. The headline index for the equivalent survey for India’s manufacturing sector was unchanged at 51.4 in September, matching its lowest level since May 2018.

Looking forward

On Wednesday in Europe, Swiss CPI and UK PMI construction reports are scheduled. In North America, US ADP employment, US motor vehicle sales, and EIA Petroleum Status figures are due. New York Fed President John Williams is also scheduled to speak.

Global stock markets

 

Index

30 Sep 2019

1 Oct 2019

Daily Change

% Change Dily

North America

 

 

 

 

 

United States

Dow

26916.83

26573.04

-343.79

-1.3

 

NASDAQ

7999.34

7908.68

-90.66

-1.1

 

S&P 500

2976.74

2940.25

-36.49

-1.2

Canada

S&P/TSX Comp

16658.63

16447.66

-210.97

-1.3

Europe

 

 

 

 

 

UK

FTSE 100

7408.21

7360.32

-47.89

-0.7

France

CAC

5677.79

5597.63

-80.16

-1.4

Germany

XETRA DAX

12428.08

12263.83

-164.25

-1.3

Italy

MIB

22107.7

21927.57

-180.13

-0.8

Spain

Ibex 35

9244.6

9165.9

-78.70

-0.9

Sweden

OMX Stockholm 30

1647.67

1635.64

-12.03

-0.7

Switzerland

SMI

10078.32

9952.5

-125.82

-1.3

Asia/Pacific

 

 

 

 

 

Australia

All Ordinaries

6800.56

6853.01

52.45

0.8

Japan

Nikkei 225

21755.84

21885.24

129.40

0.6

 

Topix

1587.8

1603

15.20

1.0

Hong Kong

Hang Seng

26092.27

*

*

*

S. Korea

Kospi

2063.05

2072.42

9.37

0.5

Singapore

STI

3119.99

3146.03

26.04

0.8

China

Shanghai Comp

2905.19

*

*

*

Taiwan

TAIEX

*

10967.65

137.97

1.3

India

Sensex 30

38667.33

38305.41

-361.92

-0.9

*Markets closed

 

 

 

 

 

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.