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On 06 June 2019 - Stocks up on US-Mexico trade hopes, Europe disappointed by ECB

Anne D Picker

Anne D Picker - Econoday

Markets eye Fed, US jobs data Friday

US markets

US shares perked up Thursday on reports suggesting better prospects for a deal to avert US tariffs on Mexican imports. US-Mexico talks were to resume late Thursday, and reports said the US may be open to delaying the imposition of tariffs as the talks continue. On the negative side were new comments from President Trump threatening to proceed with tariffs on Chinese imports.

Markets continued to focus on expectations for US rate cuts, hopes that were fanned by New York Fed President John Williams, who said the Fed was troubled by excessively low inflation, and concerned about the impact of tariffs. Trading was cautious ahead of US jobs figures due for release Friday.

The Dow industrials rose 0.7 percent; the S&P 500 gained 0.6 percent, and the NASDAQ was up 0.5 percent.

US automakers recovered most of their losses late in the day on hopes for a Mexico trade deal, but still ended weaker.

In economic news, US jobless claims remained low and favorable and are consistent with strong conditions in the labor market. Initial claims for the June 1 week came in at 218,000, in line with the 4-week average at 215,000. These data are pointing at strength for tomorrow's monthly employment report. In other data, April was a very weak month for US cross-border trade headlined by a monthly deficit of $50.8 billion. Exports fell 2.2 percent in the month to $206.8 billion while imports also fell 2.2 percent, to $257.6 billion.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was up US$1.68 to $62.32 while gold was US$3.12 higher at $1,333.30. The US dollar was weaker against the euro, the Canadian dollar and the Swiss franc; it was little changed against most other major currencies. The yield on the US Treasury 30-year bond was down 2 basis points to 2.62 percent while the yield on the 10-year note was up 1 at 2.13 percent.

European markets

European shares ended flat to weaker Thursday as the market reacted with mild disappointment to the ECB’s policy statement, which was not as dovish as the market hoped.

The European STOXX 600 ended unchanged. The German DAX fell 0.2 percent, the French CAC fell 0.3 percent, and the UK FTSE 100 rose 0.5 percent.

Renault fell about 7 percent after Fiat Chrysler backed out of a planned merger. Bank stocks ended down in the wake of the ECB news.

The ECB meeting left interest rates unchanged as expected but said it extended forward guidance from ‘‘... at least through the end of 2019...'' to "at least through the first half of 2020". This means that the benchmark refi rate is now expected to be held at 0 percent for an additional six months. The central bank reaffirmed its intention to keep its QE stance unchanged "for an extended period of time past the date when it starts raising the key ECB interest rates...". The ECB also issued details on the new series of quarterly targeted longer-term refinancing operations (TLTRO III), starting in September.

Asia Pacific Markets

Most major Asian markets closed little changed Thursday, with weakness in China the main exception. The Shanghai Composite index dropped 1.2 percent on the day, largely reflecting renewed weakness in the tech sector and ongoing concerns about global trade tensions. In Japan the Nikkei index was flat on the day, while the Topix lost 0.3 percent, with Hong Kong’s Hang Seng index advancing 0.3 percent on the day. Markets in China and Hong Kong will be closed Friday for a holiday.

The Reserve Bank of India's Monetary Policy Committee cut the benchmark repurchase rate by 25 basis points at its policy review held Thursday, in line with the consensus forecast. This follows similar cuts at its two most recent meetings in April and February and takes the rate to its lowest level since July 2010. Officials have also changed their description of the policy stance from “neutral” to “accommodative”. Since the RBI’s last policy meeting incoming data had generally shown weak growth and only a modest increase in headline inflation, prompting modest revisions to official’ near-term forecasts. Today's decision also suggests that officials remain open to lowering rates again in upcoming meetings if inflation stays below the mid-point of the RBI's target range of 2.0 percent to 6.0 percent.

Australian data showed little change in the trade balance in April, with exports and imports both rebounding on the month to a similar extent after falling in March. Singapore’s PMI survey showed a fall in its headline index from 53.3 in April to 52.1 in May, indicating that conditions there remain relatively solid.

Looking forward

A big day for economic indicators Friday: the main event is the US jobs report, followed by US wholesale trade and consumer credit. Canada will release housing starts and labor force data. In Europe, Germany and France both issue industrial production and merchandise trade data. Italy has retail sales, and UK has the Halifax house price index.

Global Stock Markets

 

Index

6 Jun 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

25720.66

25347.77

0.7

 

NASDAQ

7615.55

7607.35

0.5

 

S&P 500

2843.49

2802.39

0.6

Canada

S&P/TSX Comp

16227.8

16297.46

0.1

Europe

 

 

 

 

UK

FTSE 100

7259.85

7268.95

0.5

France

CAC

5278.43

5312.69

-0.3

Germany

XETRA DAX

11953.14

12027.05

-0.2

Italy

MIB

20177.81

20260.98

0.1

Spain

Ibex 35

9169.2

9191.80

0.2

Sweden

OMX Stockholm 30

#N/A

1565.12

*

Switzerland

SMI

9682.29

9680.87

0.2

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6466.4

6580.39

0.4

Japan

Nikkei 225

20774.04

21260.14

0.0

 

Topix

1524.91

1550.99

-0.3

Hong Kong

Hang Seng

26965.28

27390.81

0.3

S. Korea

Kospi

#N/A

2048.83

*

Singapore

STI

3146.18

3165.32

*

China

Shanghai Comp

2827.8

2909.91

-1.2

Taiwan

TAIEX

10409.2

10312.31

-0.5

India

Sensex 30

39529.72

39749.73

*

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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