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On 6 November 2019 - US mixed, lower on trade worry, oil; Europe firm; Asia mixed

Anne D Picker

Anne D Picker - Econoday

Markets eye report that US-China trade pact may be delayed.

US markets

US equities ended narrowly mixed to lower Wednesday as energy stocks gave back some of their big recent gains after crude oil prices corrected about a dollar lower. The Dow industrials and S&P were both unchanged while the NASDAQ was down 0.3 percent.

Risk sentiment was dented by a Reuters report that a senior Trump administration official said signing of a US-China trade deal may be delayed until December, and that the two sides may still fail to reach an agreement. Markets still expect a face-saving interim trade deal, as reaction to the story was limited, but confirmation of trouble would hit markets like a thunderclap. Markets also reacted badly to an unexpected drop in US productivity reported for the third quarter, a distinct negative for profitability.

Health care was the best performer, led by buoyant earnings at Humana, the health insurer, up 3.5 percent on strong sales of its Medicare Advantage health plans, and at CVS Health Corp., up 5.4 percent, on pharmacy benefit plan sales. Consumer staples outperformed on strength in cosmetics, including Coty, which surged 13.4 percent on a positive earnings surprise. On the downside, communications services were hit by an earnings miss at CenturyLink, a communication technology company, which fell 2.3 percent. In M&A news, the Wall Street Journal reported printer company Xerox, up 3.6 percent, may buy computer giant Hewlett-Packard which rose 6.4 percent.

In US economic news, hours worked increased faster than output in the third quarter, pulling down nonfarm productivity by an unexpected 0.3 percent. More hours worked relative to output also points to higher unit labor costs which increased at a higher-than-expected 3.6 percent rate in the quarter. Compensation per hour rose 3.3 percent in the quarter.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.08 to US$61.86, while gold rose by US$6.90 to US$1493.10. The US dollar was on net little changed against major currencies. The US Treasury 30-year bond yield fell 4 basis points to 2.30 percent while the 10-year note yield fell 3 basis points to 1.82 percent.

European markets

Most major European equities indexes edged up Wednesday with consumer staples leading, and riskier cyclical shares retreating after recent gains. The Europe-wide STOXX 600 and the German DAX both rose 0.2 percent, the French CAC rose 0.3 percent and the UK FTSE-100 was up 0.1 percent.

Markets have been propelled higher recently by hopes for progress on US-China trade talks, but the risk-on rally paused Wednesday, as news was light during the European hours. Weakness in sterling lifted UK exporters British American Tobacco, up 1.8 percent, and Diageo, the drinks leader, up 0.8 percent.

Outperformers included food & beverage, retail, chemicals, and personal & household goods; underperformers featured basic resources, construction & materials, telecom, and autos & parts. Among companies in focus, Ahold Delhaize, a Dutch grocer, rose 5 percent after reporting strong quarterly results, with sales best in the US. Additionally, Brenntag, a German chemicals distributor, rose 4.4 percent on a positive earnings surprise. On the downside, German sportswear company Adidas fell 4.8 percent as its shoe sales disappointed.

In economic news, German manufacturing orders were surprisingly strong in September. Following a 0.4 percent monthly fall in August, orders rose 1.3 percent, their first increase since June. However, at minus 5.3 percent, annual growth remained deep in negative territory, albeit up on the previous period's minus 6.5 percent. In a separate report, final October PMI results confirm near-stagnation in Eurozone business activity. Although the 50.2 flash composite output index was revised up to 50.6 and now stands 0.5 points above its final September reading, it remains ominously close to the 50-expansion threshold.

Asia Pacific markets

Moves in major Asian markets were mixed but generally moderate Wednesday, with the regional data calendar light and news on US-China trade talks limited. Japan’s Nikkei and Topix indices closed the day up 0.2 percent and flat respectively, while Hong Kong’s Hang Seng index also closed unchanged. The Shanghai Composite index fell 0.4 percent and Australia’s All Ordinaries index dropped 0.6 percent. Chinese authorities set the yuan reference rate just above 7.00 per US dollar, its strongest level since August, while Australian sovereign debt continues to weaken, with the 10-year bond yield increasing 7 basis points on the day.

PMI survey data published Wednesday showed a contraction in Japan’s service sector in October, with the survey’s headline index falling to 49.7, below the flash estimate of 50.2, and confirming a sharp drop from 52.8 in September. This decline mainly driven by a fall in the survey's measure of new orders growth, with survey respondents citing the impact of adverse weather and the recent increase in consumption tax rates.

New Zealand labor market statistics for the three months to September showed employment growth of 0.2 percent on the quarter, down from an increase of 0.6 percent in the three months to June. Employment rose 0.9 percent on the year, down from 1.4 percent previously. New Zealand's unemployment rate rose from 3.9 percent in the three months to June, its lowest level since 2008, to 4.2 percent in the three months to September while the participation rate was unchanged at 70.4 percent. Headline wages growth picked up in the three months to September, with stronger growth in the public sector outweighing weaker growth in the private sector.

Looking forward

On Thursday in Asia/Pacific, Australian merchandise trade figures are scheduled. In Europe, the Bank of England policy announcement, BOE monetary policy committee minutes, and BOE inflation report are due. In European data, German industrial production, UK Halifax HPI, and Italian retail sales data are scheduled. In North America, jobless claims, EIA natural gas, and consumer credit figures will be released.

Global stock markets

 

Index

6 Nov 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27492.56

-0.07

0.0

 

NASDAQ

8410.63

-24.05

-0.3

 

S&P 500

3076.78

2.16

0.1

Canada

S&P/TSX Comp

16745.64

63.72

0.4

Europe

 

 

 

 

UK

FTSE 100

7396.65

8.57

0.1

France

CAC

5866.74

19.85

0.3

Germany

XETRA DAX

13179.89

31.39

0.2

Italy

MIB

23373.22

8.40

0.0

Spain

Ibex 35

9398.4

-9.50

-0.1

Sweden

OMX Stockholm 30

1762.79

-6.74

-0.4

Switzerland

SMI

10318.1

45.12

0.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6773.25

-38.37

-0.6

Japan

Nikkei 225

23303.82

51.83

0.2

 

Topix

1694.45

0.29

0.0

Hong Kong

Hang Seng

27688.64

5.24

0.0

S. Korea

Kospi

2144.15

1.51

0.1

Singapore

STI

3262.69

14.06

0.4

China

Shanghai Comp

2978.6

-12.96

-0.4

Taiwan

TAIEX

11653.07

9.04

0.1

India

Sensex 30

40469.78

221.55

0.5

Note: all releases are listed in local time.

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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.