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On 3 December 2019 - US, Europe, Asia fall again on Trump trade comments

Anne D Picker

Anne D Picker - Econoday

Markets fear widening trade war.

US markets

US equities slipped Tuesday on President Trump’s latest comments pointing to a possible delay in any US-China trade accord, and on threats of European retaliation against threatened US tariffs on French goods. The Dow industrials fell 1.0 percent, the S&P 500 was off 0.7 percent, and the NASDAQ declined 0.6 percent.

Risk-off pressures continued as trade worries ramped up on Trump’s comment that he has no deadline for a trade deal and that it might be preferable to delay an agreement until after the November 2020 US election. Separately, France and the EU threatened to retaliate against Trump’s threat to impose 100 percent tariffs on French goods, as it was seen as widening the threat of tariffs after Trump surprised markets Monday by announcing import tariffs on Brazilian and Argentine goods. Meanwhile, Commerce Secretary Wilbur Ross repeated that US tariffs on Chinese goods would rise on Dec. 15 absent a trade pact, and he said France penalizes US digital companies because it is jealous of their success.

Defensive sectors including utilities and real estate were the only sectors to gain in the risk-off mood, while banks, consumer discretionary, and tech stocks lagged. Banks were hurt by a drop in US Treasury yields in the risk-off move on Trump’s remarks. Within tech, chipmakers, which are a bellwether for China trade, suffered, along with momentum champions Apple, down 1.8 percent, and Amazon, down 0.6 percent. Among other companies in focus, United Health Group, a Dow component, declined 1.0 percent on disappointing guidance, while fellow health insurer Humana rose 1.1 percent after reaffirming its full-year guidance.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose five cents to US$60.98, while gold rose by US$14.90 to US$1484.00. The US dollar declined against most major currencies. The US Treasury 30-year bond yield dropped 10 basis points to 2.16 percent while the 10-year note yield fell 11 basis points to 1.71 percent.

European markets

Most major European equities indexes were lower Tuesday on worries about prospects for a US-China trade pact, and on the escalating trade dispute between the US and France. The Europe-wide STOXX 600 declined 0.6 percent, the German DAX outperformed to rise 0.2 percent, the French CAC fell 1.0 percent, and the UK FTSE-100 dropped 1.8 percent.

The export-oriented FT-SE 100 index was hit hardest by Trump’s apparently casual remark that a US-China trade deal could wait until late 2020. Stocks with heavy Asia exposure underperformed, including HSBC, the Hong Kong-focused UK bank, which dropped 2.3 percent. Glencore, the mining company, fell 3.7 percent on poorly-received guidance. French luxury goods makers were hit hard by President Trump’s announcement that he would impose 100 percent tariffs on French champagne, cheese, and other items, and the expectation of more retaliatory measures on both sides. Luxury conglomerate LVMH was off 1.6 percent.

In economic news, Swiss consumer prices matched market expectations in November. A 0.1 percent monthly dip put annual inflation at also minus 0.1 percent, up a couple of ticks from the October rate but the second successive reading below zero. In a separate report, UK construction activity was again very soft in November. At 45.3, the sector PMI was more than a point above its October reading, on the firm side of market expectations and saw a 4-month high but it remained deep in recession territory.

Asia Pacific markets

Most major Asian markets sold off Tuesday, in line with declines on Wall Street. Regional investors reacted negatively to President Trump’s unexpected announcement Monday that he would restore tariffs on steel and aluminum imports from Brazil and Argentina, and news that the US might also impose new tariffs on a range of French products. These moves have heightened concerns that no US-China trade deal will be made before US tariffs on Chinese goods are scheduled to be raised on December 15.

Australia’s All Ordinaries index posted the biggest fall in the region Tuesday, closing down 2.1 percent. Japan’s Nikkei and Topix indices fell 0.6 percent and 0.5 percent respectively, while Hong Kong’s Hang Seng index closed down 0.2 percent. The Shanghai Composite index outperformed with an increase of 0.3 percent.

The Reserve Bank of Australia left its policy rate unchanged at a record low of 0.75 percent at its monthly policy meeting Tuesday, in line with the consensus forecast. This follows cuts of 25 basis point rates at the RBA's meetings in May, June, and October. Officials' assessment of the economic outlook was little changed, with economic growth expected to pick up next year and inflation to increase “gradually” to its 2.0 percent target. Officials also repeated their previous advice that policy rates would likely stay low for "an extended period” and their assurance that they are prepared to ease policy further if required.

Looking forward

On Wednesday in Asia/Pacific, Japanese PMI composite, Singapore PMI, China General Services PMI, and Australia GDP reports are due for release. In Europe, French PMI composite, German PMI composite, Eurozone PMI composite, and UK CIPS/PMI services reports are scheduled. In North America, US ADP employment figures and the Bank of Canada monetary policy announcement will be released.

Global stock markets

 

Index

3 Dec 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27502.81

-280.23

-1.0

 

NASDAQ

8520.65

-47.34

-0.6

 

S&P 500

3093.2

-20.67

-0.7

Canada

S&P/TSX Comp

16892.18

-89.29

-0.5

Europe

 

 

 

 

UK

FTSE 100

7158.76

-127.18

-1.8

France

CAC

5727.22

-59.52

-1.0

Germany

XETRA DAX

12989.29

24.61

0.2

Italy

MIB

22736.52

7.93

0.0

Spain

Ibex 35

9135.7

-20.60

-0.2

Sweden

OMX Stockholm 30

1697.68

-9.14

-0.5

Switzerland

SMI

10232.93

-115.51

-1.1

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6818.36

-146.94

-2.2

Japan

Nikkei 225

23379.81

-149.69

-0.6

 

Topix

1706.73

-7.76

-0.5

Hong Kong

Hang Seng

26391.3

-53.42

-0.2

S. Korea

Kospi

2084.07

-7.85

-0.4

Singapore

STI

3173.08

-14.89

-0.5

China

Shanghai Comp

2884.7

8.89

0.3

Taiwan

TAIEX

11531.58

28.75

0.2

India

Sensex 30

40675.45

-126.72

-0.3

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.