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On 5 March 2019 - Global stocks mixed as incoming data provide limited trading guidance

Anne D Picker

Anne D Picker - Econoday

Strength in services sector offsetting weakness in manufacturing.

US markets

US stocks traded in very tight ranges Tuesday, with volumes thin and incoming news providing little guidance. The Dow and the S&P both fell 0.1 percent while the Nasdaq was unchanged on the day. Retailers Target and Kohl both made solid gains after reporting a positive sales and earnings outlook for 2019 but General Electric fell sharply after advising that it expects cash flow to be negative in 2019 as the company continues efforts to restructure its power business. 

The ISM non-manufacturing report and the services PMI survey both showed a strong improvement in the sector in February, offsetting the impact of some indicators showing subdued conditions in manufacturing. The ISM report’s main index advanced from 56.7 in January to 59.7 in February, well above the consensus forecast of 57.2, with respondents reporting a big increase in both new orders and new export orders. Stronger new orders and new export orders also helped the services PMI whose headline index rose from 54.2 to 56.0, its highest level since last July, with the survey’s measures of output and employment also picking up.

New home sales data for December also beat expectations, increasing 3.7 percent from a downwardly revised 599,000 in November to 621,000 in December, with median sale prices increasing 5.0 percent to US$318,600. Although October sales were also revised down and year-on-year volumes and prices in December remained in negative territory, the data suggest that conditions in the housing market in most parts of the country did see some improvement at the end of the year. 
The Redbook survey of retail stores showed sales grew 4.2 percent on the year in the March 2 week, down from 5.2 percent in the previous week and the smallest increase in more than 10 months.

These data reflect observations at 4:00 PM US ET. Gold rose US$1.40 to US$1,288.90 while dated Brent spot crude advanced US$0.20 to US$65.87. The US dollar fell against the Swiss franc and was flat against the pound and the euro and flat against the yuan and the Australian dollar. The yield on the US Treasury 30 year bond fell 1 basis point to 3.08 percent while the 10 year note dropped 1 basis points to 2.72 percent.

European markets

Most European markets closed higher Tuesday after PMI survey data showed stronger conditions in the services sector. The FTSE outperformed with an increase of 0.7 percent while the CAC and the DAX both rose 0.2 percent. Telecoms stocks were among the stronger performers after Vodafone announced plans to raise around €4 billion by issuing mandatory convertible bonds. 

The PMI survey for the Eurozone services sector showed a strong improvement in conditions in February, with the main index increasing from 51.2 to 52.8. This pushed the composite index, covering both the services and manufacturing sectors, up from 51.0 to 51.9, but still suggests that regional GDP is likely to grow by only around 0.2 percent in the three months to March.  This, in turn, may well prompt a downward revision to the European Central Bank’s growth forecasts at its policy meeting later in the week. Both the German and French PMI surveys showed stronger conditions in each country’s services sector in February, helping to offset ongoing weakness in their respective manufacturing sectors. The UK service sector PMI survey also showed an increase in its main index and, combined with moves in the previously-published manufacturing and construction indices, pushed the composite index up from 50.3 in January to 51.4 in February. 

Eurozone retail sales posted a solid rebound in January, up 1.3 percent on the month after falling 1.4 percent in December, with year-on-year growth also accelerating from 0.3 percent to 2.2 percent. The strength was largely driven by German sales but was broad-based across categories. Italian GDP data confirmed that the economy fell back into recession last quarter, with output down 0.1 percent in the three months to December after falling the same amount in the three months to September. GDP was flat on the year after increasing 0.1 percent previously, with forward-looking indicators suggesting no meaningful improvement near-term. Headline Swiss inflation was steady at a year-on-year 0.6 percent in February, with underlying inflation falling from 0.5 percent to 0.4 percent. 

Asia Pacific Markets

Asian markets were mixed Tuesday. Japan’s Nikkei and Topix indices fell 0.4 percent and 0.5 percent respectively, while the Shanghai Composite index advanced 0.9 percent after the government announced plans for “stronger” fiscal policy.

India’s Sensex index was the strongest performer in the region, closing up 1.1 percent on Tuesday after a market holiday Monday. Sentiment appeared little impacted by news that the United States will withdrawal preferential trade treatment for some of India’s exports that allow them to be imported duty-free, with Indian officials confident this move will have a minimal impact on the economy and bilateral trade relations. Hong Kong’s Hang Seng index closed flat on the day, while Australia’s All Ordinaries index fell 0.3 percent.

The Reserve Bank of Australia left policy rates on hold at 1.50 percent at its meeting Tuesday, in line with expectations. Officials’ assessment of economic conditions and prospects were little changed from previous public comments, with the domestic economy expected to grow by around 3.0 percent this year and underlying inflation forecast to rise gradually from current levels. RBA Governor Philip Lowe is speaking at an event today and will likely provide an updated account of officials’ views about the policy outlook after he announced last month that they now consider that the chances of the next move in policy rates, whether higher or lower, are now “evenly balanced”.

Chinese Premier Li Kequiang delivered the government’s annual report to the National People’s Congress Tuesday, announcing a target range for GDP growth of between 6.0 percent and 6.5 percent for 2019, compared with the target of “around 6.5 percent” in 2018. Official data published January show China’s economy grew by 6.6 percent in 2018, the slowest annual growth since 1990. As part of efforts to address this slowdown, Premier Li advised that monetary policy would remain “prudent” but fiscal policy would be “stronger”, announcing cuts to value-added tax rates and higher growth for military spending. Reflecting these and other fiscal measures, the target for the budget deficit has been increased from 2.6 percent of GDP in 2018 to 2.9 percent in 2019.  

Regional PMI surveys showed conditions improved in Japan’s and India’s services sector in February but weakened in China’s. Equivalent PMI surveys for the manufacturing sector published last week showed conditions deteriorated in Japan, improved but remained weak in China, and picked up in India.  Economy-wide PMI surveys for Hong Kong and Singapore were also published Tuesday, with both showing that activity contracted in February.

Looking forward

Australian GDP data for the three months to December will be released shortly. The European data calendar is clear Wednesday, with the ADP Employment Report and international trade data the main highlights of the US data calendar. The Bank of Canada is expected to leave rates on hold at its policy meeting Wednesday.

Global Stock Markets



Mar 5 2019

Daily Change

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North America

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Ibex 35





OMX Stockholm 30











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Sensex 30




*Markets closed
Source: Haver Analytics

Note: all releases are listed in local time.

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