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On 5 November 2019 - US mixed; Europe, Asia better on rising US-China trade hopes

Anne D Picker

Anne D Picker - Econoday

Reports suggest US may scale back tariffs as part of interim pact.

US markets

US equities ended mixed Tuesday after reports that the US may scale back tariffs already imposed on China, and may scrap plans to impose others as part of a phase one trade pact. Markets also reacted to an upside surprise in US ISM nonmanufacturing data, which allayed concerns about weakness spreading from the US manufacturing sector. The Dow industrials rose 0.1 percent, the S&P 500 declined 0.1 percent, and the NASDAQ was up a marginal 0.02 percent.

Value stocks outperformed momentum shares for a second day, with retail, autos, apparel, and financials leading, while real estate, utilities and homebuilders struggled. Banks led the gainers, in part because of rising interest rates, as US Treasuries dropped for a second day. Energy stocks continued their run as crude oil prices rose. Consumer staples showed special strength, led by Kroger, the grocer, which was up 11.4 percent after reporting strong sales and improved guidance.

Among other companies in the news, Marriott, the hotel company, rose 2.7 percent after exceeding revenue expectations and cutting its earnings guidance. Adobe, the software company, rose 4.3 percent after a revenue beat and raising its outlook. Tapestry rose 1.6 percent after an earnings miss though the retailer did reaffirm guidance. On the downside, Myriad Genetics, a biotech, plunged 40 percent on a huge miss on earnings and revenues. Shake Shack, the fast food company, dropped 21 percent on disappointing growth and margins.

In US economic news, the trade gap came in as expected at $52.5 billion for September and improved from August's revised $55.0 billion. The report showed little change in the contraction under way for both imports and exports, down 1.7 percent to $258.4 billion for the former and down 0.9 percent to $206.0 billion for the latter. In a separate report, ISM's non-manufacturing sample reports better-than-expected acceleration in composite activity, at a headline 54.7 for October which was just above Econoday's consensus range. Business activity (output) and employment contributed to the gain as did a nearly 2-point rise in new orders to 55.6 in a gain that reflects, not strength in exports which were flat, but strength in domestic demand.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 81 cents to US$62.94, while gold dropped by US$24.60 to US$1,486.20. The US dollar was up against major currencies. The US Treasury 30-year bond yield rose 7 basis points to 2.34 percent while the 10-year note yield rose 8 basis points to 1.86 percent.

European markets

Most major European equities indexes edged up Tuesday with cyclical shares leading on more headlines pointing to a US-China trade deal. The Europe-wide STOXX 600 rose 0.2 percent, the German DAX gained 0.1 percent, the French CAC was up 0.4 percent and the UK FTSE-100 rose 0.2 percent.

Mining shares, energy, and banks led the gains, while defensives including utilities, health care and real estate lagged after more reports of progress in US-China trade talks, including a report that the US may roll back tariffs as part of an interim trade pact. Glencore, the UK miner, rose 3.4 percent, and BP, the oil supermajor, rose 1.6 percent. Associated British Foods, the grocer, rose 5.3 percent after upbeat quarterly results.

Some weak quarterly reports restrained the market from bigger gains, including Siemens Gamesa, a Spanish renewable energy company, down 8.7 percent, after lowering its guidance. Pandora, the Danish jeweler, dropped 18 percent after cutting its sales forecast.

In economic news, UK services were a little stronger than expected in October. The sector PMI weighed in at 50.0, up from 49.5 in September and bang on the threshold between growth and contraction. Separately, Eurozone producer prices (ex-construction) lived up to expectations in September. A 0.1 percent monthly increase saw annual PPI inflation slide from minus 0.8 percent to minus 1.2 percent, its seventh consecutive drop and the weakest reading in three years.

Asia Pacific markets

Japanese markets posted strong gains Tuesday as trading resumed after Monday’s holiday, catching up with gains made elsewhere, while other major markets in the region also closed higher. The Nikkei and Topix indices rose 1.8 percent and 1.7 percent respectively, with sentiment supported by growing confidence about the outlook for US-China trade talks. The Shanghai Composite index rose 0.4 percent, Hong Kong’s Hang Seng advanced 0.5 percent on the day, while Australia’s All Ordinaries index closed up 0.2 percent.

The Reserve Bank of Australia left its policy rate unchanged at a record low of 0.75 percent, in line with the consensus forecast. This followed cuts of 25 basis point rates at the RBA's meetings in May, June, and October. Officials retained their view that the domestic economy appears to have reached "a gentle turning point" and forecast it to expand at around 2.25 percent this year and at around 3.0 percent in 2020. They also continue to expect inflation to "increase gradually" from current levels below their target of 2.0 percent, forecasting underlying inflation to be close to that level in both 2020 and 2021. Despite leaving rates on hold this month, officials advise that they are prepared to ease policy further if required.

PMI surveys published Tuesday showed subdued conditions in the Chinese and Indian services sectors and a sharp deterioration in economy-wide conditions in Singapore and Hong Kong. The Markit China PMI survey's business activity index for the services sector fell from 51.3 in September to 51.1 in October, with respondents reporting weaker growth in new orders and employment, slightly stronger growth in new export orders, and weaker confidence about the twelve-month outlook in October. The equivalent index for the Indian services sector rose from 48.7 to 49.1, indicating contraction in the sector for a second consecutive month. The Markit Hong Kong PMI survey's headline index fell from 41.5 in September to 39.3 in October, its lowest level since November 2008 and indicating that the impact on the economy of recent civil unrest has intensified. The equivalent index for Singapore fell from 48.3 in September to 47.4 in October, its lowest level since August 2012 and indicating contraction in the Singapore economy for the third consecutive month.

Looking forward

On Wednesday in Asia/Pacific, New Zealand labor market conditions, Japanese BOJ MPB minutes, and Japanese PMI composite reports are scheduled. In Europe, German manufacturers' orders, French PMI composite, German PMI composite, Eurozone retail sales, and Eurozone PMI composite reports are due. In North America, Canada Ivey Purchasing Managers, plus US productivity and costs, and the EIA petroleum status figures will be released.

Global stock markets

 

Index

5 Nov 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27492.63

30.52

0.1

 

NASDAQ

8434.68

1.48

0.0

 

S&P 500

3074.62

-3.65

-0.1

Canada

S&P/TSX Comp

16681.92

12.11

0.1

Europe

 

 

 

 

UK

FTSE 100

7388.08

18.39

0.2

France

CAC

5846.89

22.59

0.4

Germany

XETRA DAX

13148.5

12.22

0.1

Italy

MIB

23364.82

53.39

0.2

Spain

Ibex 35

9407.9

-8.50

-0.1

Sweden

OMX Stockholm 30

1769.53

-1.50

-0.1

Switzerland

SMI

10272.98

-64.09

-0.6

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6811.62

11.78

0.2

Japan

Nikkei 225

23251.99

401.22

1.8

 

Topix

1694.16

27.66

1.7

Hong Kong

Hang Seng

27683.4

136.10

0.5

S. Korea

Kospi

2142.64

12.40

0.6

Singapore

STI

3248.63

12.23

0.4

China

Shanghai Comp

2991.56

16.07

0.5

Taiwan

TAIEX

11644.03

87.18

0.7

India

Sensex 30

40248.23

-53.73

-0.1

*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.