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On 5 December 2019 - US firm, Europe flat to lower amid trade uncertainty; Asia better

Anne D Picker

Anne D Picker - Econoday

Reports say US-China talks continue but disagreements remain.

US markets

US equities were marginally higher Thursday as US-China trade headlines left markets uncertain about prospects for an interim pact. The Dow industrials rose 0.1 percent, the S&P 500 rose 0.2 percent, and the NASDAQ was up 0.1 percent.

Treasury Secretary Steven Mnuchin said the trade talks remain on track but are not linked to a specific deadline for agreement, and the Wall Street Journal said trade talks are ongoing though the sides remain at odds over key issues including Chinese agriculture purchases and the size of US tariff cuts. Earlier, the Chinese Commerce Ministry said the two sides are in close communication. Other discord between the US and China added to uncertainty.

Oil headlines created volatility for energy stocks, as oil exporters continued meeting amid conflicting reports about prospects for production cuts. Reuters said OPEC and other oil exporters are nearing a pact to cut output. Brent crude oil prices were up slightly on the day, but oil supermajors underperformed, with ConocoPhillips down 1.1 percent. Consumer staples and consumer discretionary stocks were down, along with industrials and health care. Gainers included communication services, financials, tech, and materials.

Among companies in focus, RH, the hardware company, rose 13.4 percent after raising its guidance. On the downside, United Airlines fell 0.4 percent on news of a management reshuffle. Costco, the retailer, declined 1.2 percent despite better than expected same-store sales. Kroger, the grocer, dropped 3 percent on disappointing earnings. Sage Therapeutics, a pharma, plunged 60 percent on gloomy news in its depression drug trials.

In economic news, jobless claims came in much lower than expected in the November 30 week, down 10,000 to 203,000 to pull the 4-week average, which had been on the rise, down more than 2,000 to 217,750 and very near levels in October.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 39 cents to US$63.40, while gold rose by 40 cents to US$1,481.10. The US dollar weakened against major currencies. The US Treasury 30-year bond yield rose 2 basis points to 2.25 percent while the 10-year note yield rose 3 basis points to 1.80 percent.

European markets

Major European equities indexes were flat to weaker Thursday on weak economic data and mixed company news amid lingering uncertainty over US-China trade. The Europe-wide STOXX 600 eased 0.1 percent, the German DAX slipped 0.7 percent, the French CAC rose 0.03 percent, and the UK FTSE-100 fell 0.7 percent.

UK shares underperformed as exporters were hurt by a rise in sterling on new polls showing a convincing win for the Conservative Party in upcoming elections. A Tory win is expected to bring an end to Brexit uncertainty that has weighed on the UK currency.

Among companies in focus, M & G, a UK asset manager, fell 1.4 percent after halting redemptions from its troubled property investment fund. Separately, DS Smith, a UK packaging company, dropped 7.2 percent on poor earnings and weaker guidance. Among winners, Dunelm, a UK housewares retailer, soared 19.6 percent after raising its profits forecast and unveiling its new website.

In economic news, Eurozone retailers had a surprisingly poor October. Volume sales fell 0.6 percent on the month after a downward revision to September, which now shows a 0.2 percent drop. Annual growth nearly halved to 1.4 percent, its lowest since May. In a separate report, German manufacturing orders were softer than expected in October. Although September's monthly rise was revised up to 1.5 percent, October saw a 0.4 percent drop, the fourth decrease in the last six months.

Asia Pacific markets

Most major Asian markets closed higher Thursday, bouncing back from losses earlier in the week. Investor sentiment was boosted by reports suggesting that a "phase-one" US-China trade deal may be concluded before the scheduled hike in US tariffs on Chinese goods December 15, but uncertainty remains high.

Australia’s All Ordinaries index outperformed with an increase of 1.1 percent after the publication of weak retail sales and trade data indicating that there remains a strong chance of further policy rate cuts in the new year, while India’s Sensex index closed down 0.2 percent after the Reserve Bank of India unexpectedly left policy rates on hold. Japan’s Nikkei and Topix indices advanced 0.7 percent and 0.5 percent respectively, the Shanghai Composite index closed up 0.7 percent, and Hong Kong’s Hang Seng index gained 0.6 percent.

At its policy meeting Thursday, the RBI’s Monetary Policy Committee left its main policy rate unchanged at a nine-year of 5.15 percent, contrary to the consensus forecast for a cut of 25 basis points. This follows a cumulative cut of 135 basis points at its previous five meetings. Although recent data have shown weak activity and subdued underlying price pressures, officials expect the policy rate cuts already delivered will have a significant impact on the economy, and also are looking for more clarity about how much fiscal support the government will provide in its annual budget. Based on these factors, officials concluded that it is appropriate to "pause" policy easing "at this juncture" while still recognising that there is "space" for further rate cuts in the future.

Australian data showed weaker retail sales growth and a smaller trade surplus in October. Retail sales were flat on the month after increasing 0.2 percent previously, with more subdued growth in five of the six major categories of spending and falls in the two most populous states, New South Wales and Victoria. This weakness in sales is consistent with the Reserve Bank of Australia's view that subdued increases in household income are weighing on consumer spending. Australia's trade surplus narrowed from a revised A$6.847 billion in September to A$4.502 billion in October, well below the consensus forecast for a surplus of A$6.1 billion. Growth weakened for both exports and imports, but to a greater extent for exports.

Looking forward

On Friday in Asia/Pacific, the Japanese CPI household spending report is due for release. In Europe, German industrial production, French merchandise trade, UK Halifax HPI, and Italian retail sales figures are scheduled. In North America, Canadian labor force survey, US employment situation, US consumer sentiment, and US consumer credit data are due.

Global stock markets

 

Index

5 Dec 2019

Daily Change

% Change Daily

North America

United States

Dow

27677.79

28.01

0.1

 

NASDAQ

8570.7

4.03

0.1

 

S&P 500

3117.43

4.67

0.2

Canada

S&P/TSX Comp

16854.92

-42.42

-0.3

Europe

UK

FTSE 100

7137.85

-50.65

-0.7

France

CAC

5801.55

1.87

0.0

Germany

XETRA DAX

13054.8

-85.77

-0.7

Italy

MIB

22969.4

-64.80

-0.3

Spain

Ibex 35

9243.4

-27.40

-0.3

Sweden

OMX Stockholm 30

1723.63

-1.97

-0.1

Switzerland

SMI

10363.5

28.94

0.3

Asia/Pacific

Australia

All Ordinaries

6791.15

76.78

1.1

Japan

Nikkei 225

23300.09

164.86

0.7

 

Topix

1711.41

8.14

0.5

Hong Kong

Hang Seng

26217.04

154.48

0.6

S. Korea

Kospi

2060.74

-8.15

-0.4

Singapore

STI

3174.19

14.40

0.5

China

Shanghai Comp

2899.47

21.35

0.7

Taiwan

TAIEX

11594.65

84.18

0.7

India

Sensex 30

40779.59

-70.70

-0.2

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.