Skip Header

On 03 September 2019 - US, Europe off as risk-off mood returns; Asia mixed

Anne D Picker

Anne D Picker - Econoday

US Treasuries better on trade, geopolitical worries, weak data.

US markets

US equities slipped and US Treasuries rose Tuesday in a risk-off move as US-China trade worries returned, US data came in weak, and global geopolitical worries continued. The Dow industrials fell 1.1 percent; the S&P 500 lost 0.7 percent, and the NASDAQ dropped 1.1 percent.

US-China trade tensions came back into focus after the US implemented new tariffs on Chinese goods Sunday. On Tuesday, Bloomberg reported the two sides are struggling to agree on a schedule or agenda for negotiations, and both sides issued hardline statements.  Other geopolitical worries included the Brexit mess, the crisis in Hong Kong, and news that Spain is headed toward uncertain new elections. In economic data, an unexpected drop in the US ISM manufacturing index into contractionary territory highlighted the impact of trade on the US economic outlook.

The weak ISM data hit materials shares, including chemicals, with Olin off 1.9 percent, and Dow Chemical off 0.6 percent. Bank shares suffered after the ISM tripped a decline in interest rates. Bank of America was off 1.6 percent and Goldman Sachs was off 2.4 percent.

Defensive shares outperformed, with utilities and real estate leading. Consumer staples rose, with strength in tobacco shares. Industrial shares underperformed, with machinery leading the way down. Energy shares fell as oil prices slipped.

In economic news, the ISM drop below 50 to 49.1 may very well make a rate-cut at the September 17-18 FOMC a certainty. New orders fell well below 50, down 3.6 points at 47.2, with new export orders down nearly 5 points at a sobering 43.3. Total backlog orders did improve but are still well into contraction at 47.4. The word improving doesn't really fit with the August report though supplier deliveries also improved though improvement here, that is better delivery times, reflects weakened levels of demand. Employment fell 4.3 points to 47.4 with production down 1.3 points at 49.5. Meanwhile, US construction spending edged only 0.1 percent higher in July in a month, however, that does show some life for residential spending which rose 0.6 percent.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil fell 29 cents to US$58.32, while gold rose US$16.90 to US$1,555.20. The US dollar gained against most major currencies. The US Treasury 30-year bond yield was down 1 basis point at 1.95 percent while the 10-year note yield was down 3 basis points at 1.47 percent.

European markets

European equities edged lower Tuesday after hawkish ECB comments, political uncertainty in UK and Spain, and worries over US-China trade. The Europe-wide STOXX 600 eased by 0.2 percent, the German DAX edged down 0.4 percent, and the French CAC was off 0.5 percent. The UK FTSE-100 eased by 0.2 percent.

Estonian central bank deputy governor Madis Muller was quoted saying there is no strong case for the ECB to resume bond buying, and other wire service reports said any renewed bond buying would be more modest than the market now expects. In other macro news, Spain appears headed for another election after coalition talks failed. Meanwhile, UK political uncertainty continues, and sterling has been volatile, as Prime Minister Boris Johnson faces a showdown in parliament over Brexit and the prospect of new elections.

Outperforming sectors in the Stoxx 600 included autos & parts, telecom, and utilities. Underperformers included oil & gas, industrial goods and services, media, and retail stocks. Among UK companies in focus, banks and homebuilders suffered on worries that Brexit will hit the domestic economy. Lloyds Bank fell 1.5 percent, while Royal Bank of Scotland was off 1.2 percent. Export-oriented firms like drinks giant Diageo rose 1 percent.

In economic news, UK construction PMI dipped a further 0.3 points to just 45.0 in August, its fourth consecutive month below the 50-expansion threshold and on the soft side of market expectations. The bad showing has been blamed on Brexit uncertainty. Meanwhile, Eurozone producer prices (ex-construction) rose 0.2 percent on the month in July, in line with market expectations. Following an unrevised 0.6 percent fall in June, this reduced yearly PPI inflation from 0.7 percent to just 0.2 percent, its lowest mark since November 2016.

Asia Pacific markets

Moves were mixed but generally modest in major Asian markets Tuesday, with Australia policy rates left on hold and no major developments in the US-China trade dispute to shift sentiment. Australia’s All Ordinaries index fell 0.1 percent on the day, while Hong Kong’s Hang Seng index dropped 0.4 percent after Reuters reported that Chief Executive Carrie Lam had told business leaders that she has “very limited” room to resolve the political crisis facing Hong Kong. Japan’s Nikkei was flat and the Topix up 0.4 percent on the day, while the Shanghai Composite index closed up 0.2 percent.

The Reserve Bank of Australia left its main policy rate unchanged at a record low of 1.00 percent, in line with the consensus forecast. This follows cuts of 25 basis point rates at the RBA's meetings in May and June. The accompanying statement showed little change in officials' assessment of economic conditions and the policy outlook, noting again that it is "reasonable to expect" that policy rates will stay low for an "extended period" to make more "assured progress" towards hitting the RBA’s inflation target. It remains likely that further rate  reductions will be considered if incoming labor market data indicate that spare capacity in the economy remains relatively high. Australian retail sales data also published Tuesday showed a fall of 0.1 percent in July, with growth weaker in six of the seven major categories of spending.

Looking forward

On Wednesday in Asia/Pacific, the Australian GDP report, China general services PMI, Japanese composite PMI, and Singapore PMI data reports are due. In Europe, the following data are due: Eurozone PMI composite, Eurozone retail sales, French PMI composite, German PMI composite, and UK CIPS/PMI Services index. In North America, the following are scheduled: the Bank of Canada policy announcement, Canadian merchandise trade, US international trade, and the Fed beige book.

Global stock markets



3 Sep 2019

Daily Change

% Change Daily

North America





United States











S&P 500





S&P/TSX Comp










FTSE 100




















Ibex 35





OMX Stockholm 30















All Ordinaries





Nikkei 225









Hong Kong

Hang Seng




S. Korea











Shanghai Comp










Sensex 30




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.