On 06 February, 2018 - Europe and Asia followed US stocks down after Monday’s plunge

Anne D Picker
Anne D Picker
Econoday7 February 2018

However, US shares regained their footing and rallied Tuesday afternoon (US ET).

US markets

US stocks rebounded in volatile trading Tuesday following the biggest one-day drops for the S&P and the Dow Jones industrials in more than six years. Stocks gyrated from negative to positive after indexes started the session 2.0 percent lower, underscoring a return of volatility to a market that until recently was marked by an absence of major shifts. The Dow advanced 2.3 percent, the S&P added 1.7 percent and the Nasdaq was up 2.1 percent.

The recent bout of volatility shattered a calm that loomed over markets in 2017 and reversed 2018’s roaring start. While last week’s pullback was dominated by a rise in inflation expectations and concerns about rising rates, the decline seen on Monday appeared to be driven by technical factors as several key support levels were breached. Railroad stocks along with computer hardware, semiconductor, and chemical stocks gained, while weakness was visible among utilities and gold stocks.

December’s trade gap widened more sharply than expected to $53.1 billion. Imports jumped 2.5 percent on the month while exports added 1.8 percent. Job openings in December were down 2.8 percent to 5.811 million.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$2.20 to US$1,331.40. Copper futures were down 0.4 percent to US$3.21. WTI spot crude was down 67 US cents to US$63.48. Dated Brent spot crude was down 69 US cents to US$66.93. The US dollar was up against the euro, pound, yen and Swiss franc. The currency was unchanged against the Canadian and the Australian dollars. The Dollar Index was up 0.1 percent. The yield on the US Treasury 30 year bond was up 6 basis points to 3.07 percent while the 10 year note was up 8 basis points to 2.80 percent.

European markets

European markets tumbled Tuesday, extending their recent declines to seven sessions. Markets around the globe were feeling the pressure after a historic sell-off in US markets on Monday. European markets have been heading lower due to a combination of rising bond yields and concerns over rising inflation and higher interest rates. The FTSE declined 2.6 percent, the CAC and DAX tumbled 2.3 percent each and the SMI was 2.9 percent lower.

Chancellor Angela Merkel's conservatives and the Social Democrats are entering a final round of talks to reach an agreement on a renewed "grand coalition." The second phase of Brexit talks has also begun in London, with the EU Chief Negotiator Michel Barnier repeating his call for more 'clarity' from the U.K. on its position.

Gerresheimer tumbled after Christian Fischer, Chairman of the Management Board, resigned due to personal reasons. Munich Re dropped after its fourth quarter net profit missed forecasts. Jenoptik sank even though the company reported higher EBIT for fiscal 2017 and confirmed its fiscal year18 revenue outlook. BNP Paribas dropped after the lender lifted its dividend and confirmed its 2020 targets after reporting a slight decline in fourth-quarter profit, hit by lower revenue and rising operating costs.

Vodafone declined after the company confirmed that it is in talks to buy some of Liberty Global's European cable assets. BP declined after it reported its first quarterly loss since mid-2016. Babcock was lower after it cut its revenue forecast. Hargreaves Lansdown declined even though it reported a 12 percent increase in profit for the first first-half of the year. In Zurich, Credit Suisse, UBS and Julius Baer tumbled along with Swiss Re, Munich Re. Swiss Life, Baloise and Zurich Insurance which all retreated. Novartis, Nestlé and Roche also were lower. In London, HSBC, Prudential, Lloyds and Barclays tumbled.

Germany's factory orders rebounded at a faster-than-expected pace at the end of 2017 on foreign demand. December factory orders increased 3.8 percent on the month after slipping a revised 0.1 percent in November. UK retail sales increased in January as rising food prices inflated spending, according to the British Retail Consortium. Retail sales increased 0.6 percent on a like-for-like basis in January from the previous year, when they had decreased 0.6 percent. On a total basis, sales rose 1.4 percent in January.

Asia Pacific Markets

Shares in the Asia Pacific region followed US stocks lower after the Dow suffered its biggest percentage drops since August 2011 and at the same time erased all of its 2018 gains on worries about rising inflation and potentially higher interest rates.

Chinese shares followed regional peers lower on fears that global central banks will tighten monetary policy. The Shanghai Composite tumbled 3.4 percent, marking its biggest single-day drop in nearly two years. The Hang Seng index was down 5.1 percent.

The Nikkei nosedived 4.7 percent as a surging yen hit exporters. This was the index’s steepest drop since June 2016. The Topix closed 4.4 percent lower amid heavy selling across the board. Finance Minister Taro Aso declined to comment on plunging share prices, but insisted that corporate performances were not getting worse and the economy was stable and improving.

Both the S&P/ASX and All Ordinaries sank 3.2 percent. The Reserve Bank of Australia left its monetary policy interest rate unchanged at 1.75 percent saying the low level of interest rates is continuing to support the Australian economy. December merchandise trade deficit was A$1.358 billion after recording a surplus of A$36 million the month before. December retail sales were down a greater than anticipated 0.5 percent on the month. The big four banks along with miners BHP Billiton, Rio Tinto, Fortescue and South32 retreated. Macquarie Group tumbled while oil majors such as Santos, Woodside Petroleum, Oil Search and Origin Energy dropped.

The Kospi was 1.5 percent lower. The Sensex was down 1.6 percent.

Looking forward

Germany posts December industrial production. France releases December merchandise trade balance. The UK releases the Halifax house price index.

Global Stock Markets

 

Index

06 Feb 2018

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

24912.77

567.02

2.3

 

NASDAQ

7115.88

148.35

2.1

 

S&P 500

2695.14

46.20

1.7

Canada

S&P/TSX Comp

15363.93

29.12

0.2

Europe

 

 

 

 

UK

FTSE 100

7141.40

-193.58

-2.6

France

CAC

5161.81

-124.02

-2.3

Germany

XETRA DAX

12392.66

-294.83

-2.3

Italy

MIB

22347.01

-474.62

-2.1

Spain

Ibex 35

9810.00

-254.50

-2.5

Sweden

OMX Stockholm 30

1511.60

-34.73

-2.2

Switzerland

SMI

8836.71

-263.68

-2.9

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

5930.22

-198.21

-3.2

Japan

Nikkei 225

21610.24

-1071.84

-4.7

 

Topix

1743.41

-80.33

-4.4

Hong Kong

Hang Seng

30595.42

-1649.80

-5.1

S. Korea

Kospi

2453.31

-38.44

-1.5

Singapore

STI

3406.38

-76.55

-2.2

China

Shanghai Comp

3370.65

-116.85

-3.4

Taiwan

TAIEX

10404.00

-542.25

-5.0

India

Sensex 30

34195.94

-561.22

-1.6

Data Source — Haver Analytics

 

 

 

Note: All releases are listed in local time.

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