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On 02 October 2019 - US, Europe sink as flight from risk continues; Asia off

Anne D Picker

Anne D Picker - Econoday

Fears multiply over recession, global trade, Brexit, other political risks.

US markets

US equities dropped Wednesday in a broad-based risk-off move as markets fretted over recession prospects and political risks, including US-EU trade tensions and Brexit. The selloff that began Tuesday with a weak US manufacturing report picked up steam Wednesday as traders focused on fallout from international trade disputes. The Dow industrials fell 1.9 percent, the S&P 500 lost 1.8 percent, and the NASDAQ was down 1.6 percent.

Worries about a trade war involving the US and Europe rose after the World Trade Organization allowed US tariffs to proceed on imports of European aircraft. Uncertainty over prospects for a no-deal Brexit continued amid disappointment over UK Prime Minister Boris Johnson’s latest offer to the EU. Worsening Hong Kong protests along with rising tensions around the US impeachment drive added to the gloom. US Treasuries and gold prices rose on safe-haven demand.

Among sectors, trade-sensitive materials and industrials were hit hardest, with airlines notable losers. Technology shares suffered, led by hardware and software. Apple was a big loser, down 2.5 percent. Energy shares sank, with oil prices down for a seventh consecutive day. Health care shares held up a bit better, with support from the opioid settlement at Johnson & Johnson (up 1.6 percent). Real estate and utilities were the best performers, but were still off.

Among companies in focus, Lennar, the homebuilder, rose 4.0 percent after an earnings and revenues beat. Stitch Fix, a clothier, fell 10.8 percent after disappointing client numbers and guidance. Ford, the automaker, fell 3.3 percent after reporting disappointing sales, while General Motors fell 4.0 percent despite better sales results.

In US economic news, ADP estimated that private payrolls in September will rise a respectable 135,000 which matches Econoday's consensus for Friday's results. This would indicate monthly acceleration in private payrolls, which in August, as reported by the Bureau of Labor Statistics, rose only 96,000. Separately, crude oil inventories rose 3.1 million barrels in the September 27 week to 422.6 million, 4.6 percent above their level last year at this time.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil fell US$1.40 to US$57.58, while gold rallied by US$18.20 to US$1,504.90. The US dollar fell against most major currencies. The US Treasury 30-year bond yield declined 1 basis points to 2.09 percent while the 10-year note yield fell 5 basis points to 1.59 percent.

European markets

European equities dropped Wednesday in a big risk-off move as Brexit news, trade worries and a succession of negatives added to fears spurred Tuesday by weak US and EU manufacturing data. The Europe-wide STOXX 600 lost 2.7 percent, the German DAX was off 2.8 percent, the French CAC fell 3.1 percent, and the UK FTSE-100 plunged 3.2 percent.

UK shares underperformed as Brexit worries increased after Prime Minister Boris Johnson’s latest offer fell flat with his EU counterparts. Export-oriented German and French markets were hit by worries over a widening US-EU trade dispute after the WTO allowed US tariffs on Airbus (down 2.0 percent) to proceed.

Meanwhile, expectations for corporate earnings darkened. Stoxx 600 companies are now expected to report a 2.2 percent drop in earnings per share for the third quarter, compared with a 1.9 percent drop projected a week ago, I/B/E/S Refinitiv said.

Among shares in the Stoxx 600, all sectors fell. Hardest hit were: construction & materials, oil & gas, financial services, and basic resources, with losses in the 3 percent range. Real estate, travel & leisure, and telecom outperformed, posted losses of about 2 percent.

In economic data, UK construction had another very poor month in September. The sector PMI weighed in at just 43.3, well short of expectations, nearly 7 points beneath the 50-expansion threshold and its second lowest reading since April 2009. Meanwhile, Swiss consumer prices were surprisingly weak in September. A 0.1 percent monthly fall reduced the annual inflation rate from 0.3 percent to just 0.1 percent, its lowest reading since December 2016.

Asia Pacific markets

Chinese markets remained closed for national holidays Wednesday, but most other major Asian markets closed lower. With the regional data calendar bare, weak US data and declines on Wall Street Tuesday were the main guides to investor sentiment. Japan’s Nikkei and Topix indices fell 0.5 percent and 0.4 percent on the day, while Hong Kong’s Hang Seng index closed down 0.2 percent as trading resumed after Tuesday’s holiday, which was marked by more civil unrest. Australia’s All Ordinaries index underperformed with a 1.5 percent decline, with major banks among the weaker performers after they were criticised by the Australian government for failing to pass on fully to borrowers the cut in policy rates announced on Tuesday.

Looking forward

On Thursday in Asia-Pacific, Australian merchandise trade, Japanese PMI composite, and Singapore PMI reports are scheduled. In Europe, Eurozone PMI composite, Eurozone PPI, Eurozone retail sales, French PMI composite, German PMI composite, and UK CIPS/PMI services reports are due. In North America, US ISM non-manufacturing index, US EIA natural gas, US factory orders, and US jobless claims figures are due.

Global stock markets

 

Index

1 Oct 2019

2 Oct 2019

Daily Change

% Change Daily

North America

 

 

 

 

 

United States

Dow

26573.04

26078.62

-494.42

-1.9

 

NASDAQ

7908.69

7785.25

-123.44

-1.6

 

S&P 500

2940.25

2887.61

-52.64

-1.8

Canada

S&P/TSX Comp

16447.66

16310.97

-136.69

-0.8

Europe

 

 

 

 

 

UK

FTSE 100

7360.32

7122.54

-237.78

-3.2

France

CAC

5597.63

5422.77

-174.86

-3.1

Germany

XETRA DAX

12263.83

11925.25

-338.58

-2.8

Italy

MIB

21927.57

21298.24

-629.33

-2.9

Spain

Ibex 35

9165.9

8912.2

-253.70

-2.8

Sweden

OMX Stockholm 30

1635.64

1593.32

-42.32

-2.6

Switzerland

SMI

9952.5

9757.28

-195.22

-2.0

Asia/Pacific

 

 

 

 

 

Australia

All Ordinaries

6853.01

6753.25

-99.76

-1.5

Japan

Nikkei 225

21885.24

21778.61

-106.63

-0.5

 

Topix

1603

1596.29

-6.71

-0.4

Hong Kong

Hang Seng

26092.27

26042.69

-49.58

-0.2

S. Korea

Kospi

2072.42

2031.91

-40.51

-2.0

Singapore

STI

3146.03

3103.45

-42.58

-1.4

China

Shanghai Comp

*

*

*

*

Taiwan

TAIEX

10967.65

10947.88

-19.77

-0.2

India

Sensex 30

38305.41

*

*

*

*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.