On 07 March, 2018 - Shares in Asia tumbled and rallied in Europe but wee mixed in the US

Anne D Picker
Anne D Picker
Econoday8 March 2018

Global markets reacted negatively to the resignation of the US chief economic advisor.

US markets

After initially declining, stocks fluctuated during Wednesday with the major averages all climbing off their respective worse levels. Only Nasdaq however, managed to increase on the day. The Dow Jones industrials were down 0.3 percent and the S&P edged down 1.32 points but the Nasdaq added 0.3 percent. The mixed close came after White House Press Secretary Sarah Sanders suggested Mexico and Canada could be exempt from President Donald Trump's planned tariffs on steel and aluminum imports. She said that there are potential carve-outs for Mexico and Canada based on national security and possibly other countries as well based on that process. Stocks initially came under pressure in reaction to news of the resignation of White House chief economic advisor Gary Cohn on Tuesday. The resignation by Cohn, a free trade advocate, reportedly came amid a dispute over Trump's plans to impose tariffs on steel and aluminum imports.

The Federal Reserve published its Beige Book in preparation for the FOMC meeting of March 20 and 21. According to the Beige Book prepared by the San Francisco Fed, all 12 districts reported that U.S. economic activity expanded at a "modest to moderate" pace in January and February and price gains were moderate. The assessments were similar to those from its prior Beige Book report in January. Auto sales were said to be flat or declining in all districts. Housing and construction outside of isolated strength in some nonresidential markets, was being held down by labor and material shortages. Inflation was described as moderate along with wage growth which, however, the report notes is picking up in many districts. It also cites modest compensation increases in a few districts due to this year's tax act. Rising costs for building materials and fuel are also noted as well as a marked increase in steel prices which the report attributes in part to a decline in foreign competition.

February ADP private payrolls increased 235,000 after surging up by a revised 244,000 jobs in January. The January international trade deficit widened to $56.6 billion from $53.9 billion in December and reaching its highest level since October of 2008.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$2.00 to US$1,329.40. Copper futures were down 0.7 percent to US$3.14. WTI spot crude was down US$1.21 to US$61.39. Dated Brent spot crude was down US$1.23 to US$64.56. The US dollar was up against the Swiss franc. It retreated against the yen, euro, pound and Australian dollar. It was virtually unchanged against the Canadian dollar. The Dollar Index was up 0.18 percent. The yields on the US Treasury 30 year bond and 10 year note were unchanged at 3.15 percent and 2.88 percent respectively.

European markets

European stock indices advanced Wednesday even though they got off to a weak start following the announcement that White House chief economic advisor Gary Cohn had resigned. The resignation by Cohn, a free trade advocate, comes after President Donald Trump announced plans to impose tariffs on steel and aluminum imports. However, the markets began to recover around midday and climbed further in late trade. The FTSE and SMI were up 0.2 percent, the CAC gained 0.3 percent and the DAX jumped 1.1 percent.

Deutsche Post advanced even though the mail and logistics group reported lower net profit for the fourth quarter due to a higher tax rate. Alstom decreased after acquiring railway Internet provider 21net. Smurfit Kappa rallied after the company's board reaffirmed its rejection of a takeover offer from US rival International Paper. Rolls Royce Holdings jumped after the plane engine maker reported 2017 profit before tax of £4.9 billion pounds, a material increase over the 2016 loss of £4.6 billion.

WPP dropped after reports that Procter & Gamble is accelerating its efforts to transform its marketing. Publicis Groupe also declined in Paris. Telecom Italia finished higher in Milan after recovering from earlier losses. The company said that its board authorized Chief Executive Officer Amos Genish to spin off its fixed access network. Novartis and Roche increased in Zurich while Nestlé finished lower. Trade fears caused metals prices to slip, driving miners Glencore, Anglo American, BHP Billiton and Rio Tinto lower.

Eurozone fourth quarter gross domestic product grew a revised 0.6 percent on the quarter after increasing 0.7 percent in the third quarter. France's January’s foreign trade gap widened as exports declined and imports increased. The trade deficit widened to €5.6 billion in January from €3.4 billion in December.

Asia Pacific Markets

In contrast to European shares, Asian indices retreated across the board after White House chief economic adviser Gary Cohn, an advocate for free trade, resigned from the Trump administration. This raised concerns that Trump will go ahead with his plan to impose tariffs and risk a trade war. Worries about the potential impact of a trade war overshadowed easing geopolitical concerns after North Korea said it is willing to talk about denuclearization.

The Shanghai Composite dropped 0.5 percent while the Hang Seng was 1.0 percent lower.

The Nikkei lost 0.8 percent and the Topix was 0.7 percent lower as steelmakers extended recent losses on tariff worries. Japan Steel Works, Nippon Steel and Kobe Steel tumbled.

The S&P/ASX was down 1.0 percent while the All Ordinaries lost 0.9 percent. Gross domestic product in the three months to December was up 2.4 percent from the same quarter a year ago after increasing 2.8 percent in the three months to September. The big four banks declined along with retailers. Lower base metal prices pulled down miners BHP Billiton and Rio Tinto. Origin Energy, Santos and Beach Energy dropped even though crude oil prices were up overnight. Gold miners Evolution Mining, Newcrest, Norther Star and Regis Resources climbed.

The Kospi was down 0.4 percent despite easing geopolitical tensions after the two Koreas agreed to hold their first summit in a decade late next month. The Sensex lost 0.9 percent as authorities widened a probe into Punjab National Bank's $2 billion fraud and White House chief economic adviser Gary Cohn, an advocate for free trade, resigned.

Looking forward

Japan releases revised fourth quarter gross domestic product will be released. Australia’s January merchandise trade balance will be released. German January manufacturers’ orders will be posted. The European Central Bank announces its monetary policy decision. In the US, the quarterly services survey for the fourth quarter will be released along with the weekly jobless claims, money supply and fed balance sheet.

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Data Source — Haver Analytics

Note: All releases are listed in local time.

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