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On 02 July 2019 - US, Asia flat as US-China trade rally fades, Europe better

Anne D Picker

Anne D Picker - Econoday

Oil drop hits energy shares on post-OPEC disappointment.

US markets

US stocks were flat to slightly better Tuesday in quiet summer trading as caution returned following Monday’s gains on better US-China trade news, and as falling oil prices depressed energy shares.

Markets also reacted unfavorably to comments from Cleveland Fed President Loretta Mester, a noted hawk and non-voter this year on the Fed’s policy committee, who said slowing in the second quarter was not enough to convince her that rate cuts are needed.

The Dow industrials edged up 0.04 percent; the S&P 500 rose 0.1 percent, and the NASDAQ was up a marginal 0.02 percent.

Oil prices plunged 5 percent after OPEC kept current production levels rather than making deeper production cuts in light of slowing global demand. Among energy stocks, ConoccoPhilips was down 3.5 percent, and Exxon Mobil was down 1.2 percent.

Among companies in focus, Delta Airlines was up 1.5 percent on favorable earnings and revenue guidance.  Simply Good Foods rose 2.5 percent on an earnings beat. Lighting maker Acuity Brands dropped 7.7 percent on an earnings and revenues shortfall.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude was down US$2.51 at US$62.55 while gold was up US$3.90 at $1413.40. The US dollar was down against most major currencies. The yield on the US Treasury 30-year bond yield fell 4 basis points to 2.51 percent while the yield on the 10-year note was off 4 basis points at 1.98 percent.

European markets

European equities were mostly higher Tuesday on carry-over response to the weekend’s US-China trade truce, but worries about US threats to impose tariffs on European goods limited the gains, especially in Germany’s export-sensitive market.

The European STOXX 600 rose 0.4 percent, the German DAX was flat at up 0.04 percent, the French CAC rose 0.2 percent, and the UK FTSE 100 rose 0.8 percent.  Italy’s FT-MIB rose 0.7 percent on news Italy’s 2019 fiscal deficit was smaller than expected, which reduced prospects for a dispute over Italy violating EU deficit rules.

UK stocks outperformed as sterling fell. UK markets also got a boost from Bank of England Governor Mark Carney’s comment that trade disputes and a no-deal Brexit might call for a supportive policy response. Drinks-maker Diageo (up 1.8 percent) was among the winners.

Food and beverage companies outperformed, with beverage company Anheuser Busch up 1.6% on news that it plans an IPO of Budweiser Brewing. Chemical companies underperformed, with Arkema down 1.8% after news it acquired ArrMaz. Airbus was among the losers, in the response to US tariff threats, down 0.9 percent.

Asia Pacific Markets

Price action was subdued in most major Asian markets Tuesday with a light regional data calendar and little major news to shift investors’ views on the outlook for global trade tensions. The Shanghai Composite index was flat on the day, while Japan’s Nikkei and Topix indices closed up 0.1 percent and 0.3 percent respectively. Australia’s All Ordinaries index was also little changed , advancing 0.1 percent after officials lowered policy rates in line with expectations.  Hong Kong’s Hang Seng index was the main exception, catching up with gains elsewhere after a local holiday Monday to close up 1.2 percent. These gains came despite more large-scale protests on Monday against the Hong Kong government’s plans to allow extradition of residents to mainland China.

The Reserve Bank of Australia cut its main policy rate by 25 basis points from 1.25 percent to a new record-low of 1.00 percent at tis meeting Tuesday, in line with the consensus forecast. This follows a similar 25 basis point rate cut at the RBA's previous meeting last month. Comments from officials have made it clear that their assessment of labour market conditions have played a major role in the recent shift in policy settings, with the level of spare capacity in the labour market taken to indicate that rates can be lowered without triggering an unwelcome increase in inflation. The statement accompanying today's decision notes that another cut in policy rates will help to make inroads into the spare capacity in the economy and "achieve more assured progress" towards the inflation target of 2.0 percent to 3.0 percent. This bias towards lower rates looks sets to continue until there are clearer signs that this spare capacity has eroded.

Looking forward

On Wednesday in Asia-Pacific: Australia’s merchandise trade, China’s General Services PMI, and Japan’s PMI Composite index, are due for release. In Europe: UK CIPS/PMI Services index is due. In North America: Canada will release its merchandise trade report, and in the US, it’s international trade, jobless claims, and the EIA Petroleum Status Report.

Global Stock Markets

 

Index

2 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26786.68

69.25

0.3

 

NASDAQ

8109.09

17.93

0.2

 

S&P 500

2973.01

8.68

0.3

Canada

S&P/TSX Comp

16471.29

*

*

Europe

 

 

 

 

UK

FTSE 100

7559.19

61.69

0.8

France

CAC

5576.82

8.91

0.2

Germany

XETRA DAX

12526.72

5.34

0.0

Italy

MIB

21392.87

138.83

0.7

Spain

Ibex 35

9281.5

16.90

0.2

Sweden

OMX Stockholm 30

1647.02

5.02

0.3

Switzerland

SMI

10020.93

50.93

0.5

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6741.1

9.72

0.1

Japan

Nikkei 225

21754.27

24.30

0.1

 

Topix

1589.84

4.99

0.3

Hong Kong

Hang Seng

28875.56

*

*

S. Korea

Kospi

2122.02

-7.72

-0.4

Singapore

STI

3370.8

-1.46

0.0

China

Shanghai Comp

3043.94

-0.96

0.0

Taiwan

TAIEX

10865.12

-30.34

-0.3

India

Sensex 30

39816.48

129.98

0.3

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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