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On 03 October 2019 - US recovers, Europe mixed; Asia off

Anne D Picker

Anne D Picker - Econoday

Rate cut hopes help market steady after two-day rout.

US markets

US equities perked up Thursday after two consecutive days of steep losses, as another soft US purchasing managers report fueled expectations for Federal Reserve rate cuts. The Dow industrials rose 0.5 percent, the S&P 500 gained 0.8 percent, and the NASDAQ was up 1.1 percent.

Among sectors, energy, technology, and real estate companies outperformed, while financials and utilities underperformed. FAANG stocks recovered after two days of big losses with Facebook, the social network, up 2.8 percent, while Google rose 1.0 percent.

Among companies in focus, PepsiCo, the drinks and snacks company, rose 3.0 percent after topping revenue expectations, and raising its guidance. Clorox, the chemical maker, fell 1.6 percent after cutting its guidance. Tesla, the electric carmaker, fell 4.2 percent after its auto deliveries missed its targets for the third quarter.

In US economic news, ISM's non-manufacturing sample reported expansion at the lowest rate since August three years ago. September's 52.6 result, like Tuesday's 47.8 disappointment for ISM's manufacturing index, was well beneath Econoday's consensus range and reflected significant softness in employment which, at 50.4, is still above 50 and still indicates net hiring but is down nearly 3 points from August which is an unfavorable indication for Friday's US employment report. Meanwhile, jobless claims remain low and consistent with strong demand for labor. Initial claims came in at 219,000 in the September 28 week with the 4-week average unchanged at a very favorable 212,500.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 4 cents to US$57.54, while gold rose by US$7.70 to US$1,512.60. The US dollar fell against most major currencies. The US Treasury 30-year bond yield declined 5 basis points to 2.04 percent while the 10-year note yield fell 5 basis points to 1.54 percent.

European markets

European equities were mixed Thursday with gains in Airbus and luxury goods makers providing support, while UK stocks underperformed on Brexit worries. The Europe-wide STOXX 600 was off a marginal 0.02 percent, the French CAC rose 0.3 percent, the UK FTSE-100 slipped 0.6 percent, while the German DAX was closed for a holiday.

Brexit remained a big market focus, with Prime Minister Boris Johnson getting backing for his latest plans from hardline conservatives and his Democratic Unionist Party allies, but the European parliament rejected his proposals, though UK-EU talks continued. Weak data added to the economic slowdown story.

Airbus and luxury drinks makers, including Remy Cointreau and Pernod, rose on news of selected exemptions from a new round of 10 percent punitive tariffs to be imposed on European goods by the United States in retaliation for subsidies for Airbus.

Among shares in the Stoxx 600, outperformers included food & beverage, health care, and technology, while oil & gas underperformed, along with basic resources, media, and travel & leisure.

In economic data, final September Eurozone PMI results made an already gloomy picture of overall business activity even worse. The 50.4 flash composite output index was revised down 0.3 points to just 50.1, signaling near-stagnation and the weakest performance by the Eurozone economy since June 2013.

Eurozone retail sales performed much as expected in August. Following a 0.5 percent monthly fall in July, volumes climbed 0.3 percent to put annual growth at 2.1 percent, down just a tick from July. Meanwhile, UK services sector PMI clocked a lowly 49.5 in September, much weaker than market expectations, 1.1 points below its August mark and only the fifth time in more than a decade that it has fallen below the 50-expansion threshold.

Asia Pacific markets

Markets were closed in China and South Korea Thursday and mostly closed lower elsewhere in the region. News that the United States will increase tariffs on European Union goods later in the month prompted renewed concerns about global trade tensions, with generally weak regional data Thursday also weighing on investor sentiment. Australia’s All Ordinaries index was the weakest performer in the region, dropping 2.1 percent, with major banks again posting heavy losses. Japan’s Nikkei and Topix indices fell 2.0 percent and 1.7 percent respectively after PMI data indicated conditions weakened in the services sector in September. Hong Kong’s Hang Seng index outperformed with a gain of 0.3 percent, despite ongoing civil unrest, with news that the government plans to ban the wearing of face masks at public gatherings suggesting to investors that this may help local authorities better contain the unrest.

The Markit PMI business activity index for Japan's services sector fell to 52.8 in September, matching the flash estimate of 52.8 and confirming a drop from 53.3 in August. This decline was mainly driven by weaker new orders. With the equivalent manufacturing index published earlier the week also showing a fall in the headline index, the composite Index fell to 51.5 in September, also matching the flash estimate and confirming a drop from 51.9 in August. The Markit Singapore PMI survey's headline index fell from 48.7 in August to 48.3 in September, its lowest level since August 2012 and showing contraction in the Singapore economy for the second consecutive month, with several of the survey's components falling to multi-year lows.

Australia's trade surplus narrowed from a revised A$7.253 billion in July to A$5.926 billion in August, below the consensus forecast for a surplus of A$7.5 billion. Both exports and imports fell on the month, but exports did so to a greater extent. Weaker headline growth in exports was largely driven by non-rural goods, down 3.5 percent on the month after falling 3.0 percent previously, and by a fall in the volatile category, non-monetary gold.

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

2 Oct 2019

3 Oct 2019

Daily Change

% Change Daily

North America

 

 

 

 

 

United States

Dow

26078.62

26201.04

122.42

0.5

 

NASDAQ

7785.25

7872.27

87.02

1.1

 

S&P 500

2887.61

2910.63

23.02

0.8

Canada

S&P/TSX Comp

16310.97

16369.03

58.06

0.4

Europe

 

 

 

 

 

UK

FTSE 100

7122.54

7077.64

-44.90

-0.6

France

CAC

5422.77

5438.77

16.00

0.3

Germany

XETRA DAX

11925.25

*

*

*

Italy

MIB

21298.24

21311.51

13.27

0.1

Spain

Ibex 35

8912.2

8902.2

-10.00

-0.1

Sweden

OMX Stockholm 30

1593.32

1588.41

-4.91

-0.3

Switzerland

SMI

9757.28

9760.44

3.16

0.0

Asia/Pacific

 

 

 

 

 

Australia

All Ordinaries

6753.25

6611.68

-141.57

-2.1

Japan

Nikkei 225

21778.61

21341.74

-436.87

-2.0

 

Topix

1596.29

1568.87

-27.42

-1.7

Hong Kong

Hang Seng

26042.69

26110.31

67.62

0.3

S. Korea

Kospi

2031.91

*

*

*

Singapore

STI

3103.45

3087.97

-15.48

-0.5

China

Shanghai Comp

*

*

*

*

Taiwan

TAIEX

10947.88

10875.91

-71.97

-0.7

India

Sensex 30

38305.41

38106.87

-198.54

-0.5

*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.