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On 2 April 2019 - Global stocks steady as new Brexit deadline approaches and US data meet expectations

Anne D Picker

Anne D Picker - Econoday

Reserve Bank of Australia leaves policy on hold while Australian government projects fiscal surpluses.

US markets

US stocks were mixed but little changed Tuesday. The Dow closed down 0.3 percent on the day, the S&P was flat on the day, and the Nasdaq rose 0.3 percent. The biggest gainer in the Dow index Tuesday was chemical manufacturer Dow Inc after it replaced its former parent company DowDuPont in the index, with its stock receiving several broker recommendations. Delta Air Lines also gained after raising its guidance for first-quarter earnings in response to lower-than-expected non-fuel costs but retailer Walgreens fell sharply after it reported second-quarter earnings of US$1.64 per share, below estimates of US$1.72 per share, and also reduced its full-year earnings forecast for 2019.

The durable goods orders report for February was in line with expectations but showed weaker conditions in the sector, in contrast to the ISM report published earlier in the week. Headline orders fell 1.6 percent on the month in February, close to the consensus forecast for a drop of 1.8 percent with growth in January revised down from 0.4 percent to 0.1 percent. This reflected an expected decline in aircraft orders, with ex-transportation orders increasing 0.1 percent on the month, close to the consensus forecast for no change and rebounding slightly from a fall of 0.1 percent in January. Core capital goods were also close to flat on the month, weakening from a solid increase previously. The Redbook survey of retail sales showed a fall in year-on-year growth from 5.3 percent to 4.4 percent in the March 30 week, though the late timing of Easter holidays this year likely is contributing to weakness in this measure during March.

These data reflect observations at 4:00 PM US ET. Gold fell US$1.80 to US$1,296.00 while dated Brent spot crude rose US$0.45 to US$69.46. The US dollar was slightly weaker against the pound and the Swiss franc, flat against the yen, and up against other major currencies. The yield on the US Treasury 30-year bond fell 1 basis point to 2.88 percent and the yield on the 10-year note fell 2 basis points to 2.48 percent.

European markets

European markets closed higher Tuesday. A fall in the pound early in the London session helped to boost trade-sensitive UK shares, with the FTSE up 1.0 percent on the day, while the CAC and the DAX advanced 0.3 percent and 0.6 percent respectively. Rolls-Royce fell on reports that Singapore Airlines had grounded two aircraft in response to concerns about engines supplied by the company.

United Kingdom Prime Minister Theresa May met with her cabinet Tuesday to discuss the next move after parliament, having already rejected the government’s Brexit deal, failed on Monday to agree on any proposed alternative. The UK is currently set to exit the European Union on April 12 with no deal in place. Speaking after the cabinet meeting Prime Minister May said the government does not want to withdraw without a deal and would seek to extend the withdrawal date to May 22, just before European elections, and attempt to negotiate a new deal with the opposition Labour Party. The Labour Party has advocated for the UK to remain in a customs union with the EU.

The impact of ongoing Brexit uncertainty was evident in the results of the PMI survey for the UK construction sector, which showed the first back-to-back contraction in activity since mid-2016. The survey’s headline index rose marginally from 49.5 in February to 49.7 in March, with survey respondents reporting weaker commercial construction and another decline in civil engineering activity, offset by a modest pick-up in residential construction. The survey showed confidence about the outlook improved slightly but remains low, while its measure of input cost growth accelerated.

The Eurozone’s producer price index rose 0.1 percent on the month in February, down from a revised increase of 0.3 percent in January, with year-on-year growth picking up slightly from 2.9 percent to 3.0 percent. Price moves were subdued across all major categories, while stronger gains in France and Spain were offset by flat prices in Germany and a drop in prices in Italy. Swiss headline consumer price inflation picked up slightly from 0.6 percent in February to 0.7 percent in March, with underlying inflation also rising from 0.4 percent to 0.5 percent, but ongoing strength in the domestic currency suggests that price pressures will remain subdued.

Asia Pacific Markets

Most Asian markets closed moderately higher Tuesday after sharp gains on Monday. Singapore’s STI index was the strongest performer in the region, up 0.9 percent on the day, while the Shanghai Composite index and Hong Kong’s Hang Seng index both gained 0.2 percent. Japanese markets underperformed, with the Nikkei index flat on the day and the Topix index falling 0.3 percent.

The Reserve Bank of Australia again left its main policy rate unchanged at a record-low 1.50 percent at its meeting Tuesday, in line with the consensus forecast. This rate was last changed in August 2016, when it was cut by 25 basis points. Officials again noted strong labour market conditions and a pick-up in wages growth but also acknowledged that weakness in household incomes and the ongoing “adjustment” in housing markets had impacted consumer spending. Last month officials had expressed their view that household income would pick up over the next year but this month’s statement makes no such prediction. Officials continue to expect a gradual increase in underlying inflation from current levels to be 2.0 percent this year and 2.25 percent in 2020. Reflecting this assessment, they continue to see no case for a change in policy settings for now. In recent months officials have provided more details about their assessment of the policy outlook in the minutes to their meetings.

The Australian government delivered its annual budget to parliament Tuesday ahead of national elections expected to be held in the next few months. Treasurer Josh Frydenberg forecasts the budget position to strengthen from a deficit of A$4.2 billion in the 2018-19 fiscal year to a surplus of A$7.1 billion in the 2019-20 fiscal year, with larger surpluses projected in following years. These fiscal projections reflect forecasts that the Australian economy will expand by 2.75 percent in 2019-20 and 2020-21, with infrastructure spending and ongoing strength in the labour market expected to offset any potential negative impact from weaker property prices.

Looking forward

PMI surveys for Japan, China, Hong Kong, and Singapore will be published shortly, as well as Australian retail sales and trade data. PMI surveys for major European economies and the US will also be published on Wednesday along with Eurozone retail sales data and the US ADP employment report.

Global Stock Markets

 

Index

2 Apr 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26179.13

-79.29

-0.3

 

NASDAQ

7848.69

19.78

0.3

 

S&P 500

2867.24

0.05

0.0

Canada

S&P/TSX Comp

16263.87

35.81

0.2

Europe

 

 

 

 

UK

FTSE 100

7391.12

73.74

1.0

France

CAC

5423.47

17.94

0.3

Germany

XETRA DAX

11754.79

72.80

0.6

Italy

MIB

21522.92

2.67

0.0

Spain

Ibex 35

9363.5

21.80

0.2

Sweden

OMX Stockholm 30

1593.95

13.62

0.9

Switzerland

SMI

9536.57

-1.54

0.0

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6327.82

28.14

0.4

Japan

Nikkei 225

21505.31

-3.72

0.0

 

Topix

1611.69

-4.12

-0.3

Hong Kong

Hang Seng

29624.67

62.65

0.2

S. Korea

Kospi

2177.18

8.90

0.4

Singapore

STI

3279.78

29.27

0.9

China

Shanghai Comp

3176.82

6.46

0.2

Taiwan

TAIEX

10690.3

47.67

0.4

India

Sensex 30

39056.65

184.78

0.5

Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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