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On 6 February 2019 - Global stocks steady as automakers report mixed results

Anne D Picker

Anne D Picker - Econoday

Australian dollar sells off sharply after officials shift view on the policy outlook.

US markets

US stocks posted small declines Wednesday. The Dow fell 0.1 percent, the S&P dropped 0.2 percent and the Nasdaq closed down 0.4 percent. General Motors outperformed the broader market, posting a solid increase after reporting fourth-quarter earnings of US$1.43 per share, beating analysts’ expectations of US$1.22 per share. The company cited solid domestic demand and the impact of cost-cutting measures as the main factors driving this performance, with sales to China lower and expected to be flat in 2019.

President Trump in his state of the union speech Tuesday night repeated his plans to seek enhanced border security but also called for greater bipartisan cooperation. This may boost the chances that an agreement can be reached in coming days between the Administration and Congress to extend government funding beyond its current deadline of February 15 and avoid another shutdown. President Trump also announced in the speech that he will meet with North Korean leader Kim Jong Un in Vietnam later this month.

Delayed trade data for November published Wednesday showed a sharper-than-expected narrowing of the deficit from US$55.7 billion in October to US$49.3 billion. Exports fell on the month, but imports fell by more, reflecting weaker demand for consumer goods and lower petroleum prices. Bilateral trade data show imports from China fell to around US$42.8 billion in November while exports to China fell to US$7.4 billion, with this large gap likely to remain a major focus of ongoing US-China trade negotiations. Productivity data for the three months to December showed steady growth in manufacturing productivity.

These data reflect observations at 4:00 PM US ET. Gold fell US$8.70 to US$1,310.50 and dated Brent spot crude was up US$0.63 to US$62.61. The US dollar was flat against the yen but gained sharply against the Australian dollar after comments from the Reserve Bank of Australia and also advanced against most other major currencies. The yield on the US Treasury 30 year bond was unchanged at 3.03 percent while the 10 year note was steady at 2.69 percent.

European markets

European markets were slightly weaker on the day. The FTSE and the CAC both fell 0.1 percent on the day, while the DAX dropped 0.4 percent. Underperformance in German shares was partly driven by a fall in automaker Daimler after it reported a sharp decline in operating profits in the fourth quarter and scaled back guidance for 2019 sales. The company cited emission regulations and increased tariffs on vehicles imported from the United States to China as factors weighing on performance.

Germany’s Siemens and France’s Alstom posted a fall and a sharp rise respectively after European Union authorities blocked their plans to merge their railways operations, with officials citing concerns about the potential impact on competition in the sector. Officials also rejected a planned acquisition by a German copper company, prompting calls by German economy minister Peter Altmaier and his French counterpart Bruno Le Maire for EU competition rules to be relaxed to allow greater consolidation. Canada’s Bombardier also saw large gains on speculation its European operations may be an alternative target for Alstom’s expansion plans.  

Asia Pacific Markets

Several Asian markets remained closed Wednesday for lunar new year holidays, including China, Hong Kong, Singapore, Korea, and Taiwan. India’s SENSEX index advanced 1.0 percent ahead of the Reserve Bank of India’s policy decision Thursday. Officials are expected to keep rates on hold but there is also market speculation that newly-appointed Governor, Shaktikanta Das, may shift the policy stance from one of “calibrated tightening” to neutral and possibly signal a greater chance of rate cuts later in the year.

Japanese markets were again little changed, with the Nikkei up 0.1 percent and the Topix down 0.1 percent. Toyota fell on the day after reporting weaker growth in operating profits in the fourth quarter and lowering its fiscal year forecasts. Stronger sales in China and elsewhere in the region has offset weaker US demand, a trend the company expects will continue this year.

Australia’s All Ordinaries index closed 0.4 percent higher. Price moves were sharper in the currency market, with the Australian dollar selling off sharply following comments from the Governor of the Reserve Bank of Australia, Philip Lowe, confirming a shift in officials’ assessment of the policy outlook. Australian policy rates have been on hold since mid-2016 and since mid-2018 RBA officials had consistently noted that they considered the next move was likely to be an increase. Officials, however, now believe downside risks to the outlook have increased and earlier in the week lowered their growth and inflation forecasts. In his comments, Governor Lowe argued that developments in the housing market appear to be a “manageable adjustment” and are unlikely to “derail” economic growth. Nevertheless, he now considers that the probability that the next move in policy rates will be an increase appear “more evenly balanced” with the probability they it will be a decrease. Markets have also in recent weeks priced in a greater chance of a rate cut later in the year. 

Looking forward

Federal Reserve Chairman Jerome Powell will speak at an event shortly but is unlikely to use the forum to make significant comments on the policy outlook. The Reserve Bank of India and the Bank of England both meet Thursday and both are expected to leave policy rates on hold. In the US, jobless claims and consumer credit reports will be the highlights of a light data calendar.

Global Stock Markets

 

Index

Feb 6 2019

Daily Change

% Change Daily

North America

United States

Dow

25390.30

-21.22

-0.1

 

NASDAQ

7375.28

-26.80

-0.4

 

S&P 500

2731.61

-6.09

-0.2

Canada

S&P/TSX Comp

15712.31

9.62

0.1

Europe

UK

FTSE 100

7173.09

-4.28

-0.1

France

CAC

5079.05

-4.29

-0.1

Germany

XETRA DAX

11324.72

-43.26

-0.4

Italy

MIB

19996.47

162.98

0.8

Spain

Ibex 35

9100.90

8.90

0.1

Sweden

OMX Stockholm 30

1551.15

8.66

0.6

Switzerland

SMI

9143.00

-7.56

-0.1

Asia/Pacific

Australia

All Ordinaries

6091.84

23.70

0.4

Japan

Nikkei 225

20874.06

29.61

0.1

 

Topix

1582.13

-0.75

0.0

Hong Kong

Hang Seng

*

*

*

S. Korea

Kospi

*

*

*

Singapore

STI

*

*

*

China

Shanghai Comp

*

*

*

Taiwan

TAIEX

*

*

*

India

Sensex 30

36975.23

358.42

1.0

* Markets closed
Source: Haver Analytics

Note: all releases are listed in local time.

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