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On 4 December 2019 - US, Europe recover on latest trade headlines; Asia off

Anne D Picker

Anne D Picker - Econoday

Report says US-China trade talks remain on track.

US markets

US equities rebounded Wednesday on a report that the US and China are making progress toward a phase-one trade agreement, in contrast to Tuesday’s gloomier trade news that rocked global markets. The Dow industrials rose 0.5 percent, the S&P 500 was up 0.6 percent, and the NASDAQ rose 0.5 percent.

Bloomberg reported the US-China talks were making progress toward agreement on tariff reductions to allow an accord, and the deal would come before the Dec. 15 deadline for US tariff increases to take effect. Meanwhile, President Trump said the talks are going well, a contrast to his Tuesday remark that an agreement might wait until after the November 2020 US elections.

Energy stocks led the outperformers, getting a lift from rising crude oil prices on a report that OPEC is considering output cuts. Financials perked up, with banks tracking the day's rebound in interest rates. Industrials were strong, with transports and machinery the leaders. Consumer staples lagged, with tobacco stocks suffering. Tech stocks weakened, with software company earnings depressing the sector. Among companies, Salesforce.com, the software and cloud computing firm, fell 3.2 percent after reporting an earnings miss and cutting its guidance. Among winners, Expedia, the online travel company, rallied 6.2 percent after removing its CEO.

In economic news, ISM's non-manufacturing index for November came in on the low side of Econoday's consensus range, at 53.9 to indicate a moderate and slightly slower rate of composite growth compared to October's 54.7. Yet order readings were mostly positive led by a 1.5 point rise in new orders to a strong 57.1 that included a welcome 2.0 point rise in export orders to 52.0.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.03 to US$63.01, while gold fell by US$3.30 to US$1,480.70. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield rose 5 basis points to 2.22 percent while the 10-year note yield rose 6 basis points to 1.77 percent.

European markets

Most major European equities indexes bounced back Wednesday on a report suggesting US-China trade talks are still on track. The Europe-wide STOXX 600 and the German DAX both rose 1.2 percent, the French CAC gained 1.3 percent, and the UK FTSE-100 was up 0.4 percent. 

After a dramatic risk-off move Tuesday, risk-on returned Wednesday on more favorable US-China trade news and on positive economic data, including a better-than-expected China services PMI which reached a seven-month high in November. French shares perked up after President Trump and President Macron of France pledged to sort out their trade differences.

Financial services led the gainers as interest rates rose. Other winners included basic resources, with energy companies outperforming on rising oil prices. Other winners included industrials, chemicals, and technology. On the downside, defensive sectors including food & beverages, real estate, and telecoms underperformed. Among companies in focus, Airbus rose 3.2 percent on news of a large order. Semiconductor shares posted good gains, with STMicroelectronics up 2.2 percent and ASML up 2.6 percent on analyst upgrades. French telecom Orange dropped 4.7 percent on disappointment over the firm’s dividend plans.

Asia Pacific markets

Major Asian markets fell Wednesday after a busy regional data calendar and President Trump’s comments Tuesday suggesting a US-China trade deal may be delayed until after next year’s US elections. Australia’s All Ordinaries index led the declines, falling 1.5 percent after GDP data showed weaker consumer spending, while Hong Kong’s Hang Seng index fell 1.3 percent after PMI data showed a further deterioration in economic activity. Japan’s Nikkei and Topix indices fell 1.1 percent and 0.2 percent respectively. The Shanghai Composite index closed down 0.2 percent.

Australia's GDP increased by 0.4 percent on the quarter in the three months to September, slowing from a revised increase of 0.6 percent in the June quarter and falling just short of the consensus forecast for 0.5 percent. Weaker growth was largely driven by a smaller increase in household spending and government consumption as well as slower exports growth, partly offset by a smaller fall in business investment. Officials at the Reserve Bank of Australia have argued that the economy appears to have reached "a gentle turning point” and that cuts in policy rates in recent months should help growth pick up in 2020. Yet Wednesday's data could boost the case for more policy rate cuts early next year, with officials also advising that they are ready to do so if required to meet their employment and inflation objectives.

PMI surveys showed some improvement but still weak activity in the Japanese, Chinese, and Indian services sectors, improved but still subdued economy-wide conditions in Singapore, and a bigger slump in Hong Kong’s economy. The Markit China PMI survey's business activity index for the services sector rose from 51.1 in October to a seven-month high of 53.5 in November, with respondents reporting somewhat stronger growth in new orders and new export orders, a marginal increase in payrolls and weaker confidence about the 12-month outlook. The equivalent index for the Japanese services sector rose from 49.7 to 50.4, while the equivalent index for the Indian services sector rose from 49.2 to 52.7. The Markit Hong Kong PMI survey's headline index fell from 39.3 in October to 38.5 in November, its lowest level since a major epidemic in 2003, while the equivalent index for Singapore advanced from 47.4 to 50.4.

Looking forward

On Thursday in Asia/Pacific, Australian retail sales and merchandise trade reports are due and the Reserve Bank of India is to make its policy announcement. In Europe, German manufacturers’ orders, Eurozone GDP, and Eurozone retail sales are scheduled. In North America, Canadian merchandise trade, Canadian Ivey purchasing managers’ index, US international trade, US jobless claims, and US factory orders data are due.

Global stock markets

 

Index

4 Dec 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27649.78

146.97

0.5

 

NASDAQ

8566.67

46.03

0.5

 

S&P 500

3112.76

19.56

0.6

Canada

S&P/TSX Comp

16897.34

5.16

0.0

Europe

 

 

 

 

UK

FTSE 100

7188.5

29.74

0.4

France

CAC

5799.68

72.46

1.3

Germany

XETRA DAX

13140.57

151.28

1.2

Italy

MIB

23034.2

297.68

1.3

Spain

Ibex 35

9270.8

135.10

1.5

Sweden

OMX Stockholm 30

1725.6

27.92

1.6

Switzerland

SMI

10334.56

101.63

1.0

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6714.37

-103.99

-1.5

Japan

Nikkei 225

23135.23

-244.58

-1.1

 

Topix

1703.27

-3.46

-0.2

Hong Kong

Hang Seng

26062.56

-328.74

-1.3

S. Korea

Kospi

2068.89

-15.18

-0.7

Singapore

STI

3159.79

-13.29

-0.4

China

Shanghai Comp

2878.12

-6.58

-0.2

Taiwan

TAIEX

11510.47

-21.11

-0.2

India

Sensex 30

40850.29

174.84

0.4

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.