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On 08 July 2019 - US, Europe, Asia off as Fed rate cut expectations diminish

Anne D Picker

Anne D Picker - Econoday

Analyst downgrades hit tech shares, pharma off on Trump price threat.

US markets

US stocks weakened Monday as analyst downgrades hit Apple and other tech shares, and markets continued to react to diminished prospects for big near-term rate cuts after upbeat US jobs data. The Dow industrials declined 0.4 percent; the S&P fell 0.5 percent, and the NASDAQ fell 0.8 percent.

Apple, down 2.1 percent, led tech shares lower after Rosenblatt Securities downgraded the tech favorite to “sell” from “neutral.” A D.A. Davidson downgrade weakened chip equipment makers, including Applied Materials, which fell 1.2 percent.

Health care shares were off on President Trump’s threat to use an executive order to lower prescription prices. Big pharma leader Pfizer was off 1.3 percent. The Dow was depressed by a 1.4 percent drop in Boeing on news it lost a large Saudi order to Airbus due to problems with its 737 MAX jets. Among other shares in focus, Symantec rose 2.8 percent on more talk the Internet security firm may be acquired by Broadcom.

In US economic data: consumer credit came in close to expectations, up $17.1 billion in May as consumers continued to run up their credit-card debt at April's accelerated pace following more conservative spending in prior months.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude down 40 cents to US$63.83 while gold fell US8.24 to $1391.71. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield was down 1 basis point to 2.53 percent while the yield on the 10-year note was up 1 basis point at 2.05 percent.

European markets

European equities weakened slightly Monday, with notable losses for Deutsche Bank, and as markets continued to price in reduced expectations for Fed rate cuts after Friday’s strong US jobs data. The European STOXX 600 slipped 0.1 percent, the German DAX was down 0.2 percent, the French CAC was off 0.1 percent, and the UK FTSE 100 was down 0.1 percent.

UK tobacco shares gained. Imperial Tobacco was up 2.2 percent on news of a share buyback, and British American Tobacco rose 1.5 percent. Mining shares did better on rising commodities prices, with Glencore up 1.7 percent.

Losses in banks and pharmaceutical stocks weighed on the markets. Deutsche Bank initially rallied on news of a big cost-cutting and restructuring, including massive layoffs, but the shares sold off later to end down 5.4 percent. Pharma firms Merck and Bayer fell 1.3% and 1.5%, respectively.

On the positive side were dovish ECB comments and favorable news on the US-China trade dispute. White House economic adviser Larry Kudlow said high-level US-China trade talks were scheduled to resume next week.

François Villeroy de Galhau, a member of the Governing Council at the ECB, said a stimulus program could be launched soon: “if and when needed, there must be no doubt about our determination to act and our capacity to act.”

In economic news, German goods production staged a partial rebound in May. Following a marginally steeper revised 2.0 percent monthly slump in April, output rose a slightly smaller than expected 0.3 percent, its third increase in the last four months. Separately, Germany’s merchandise trade surplus rose to €18.7 billion in May, seasonally adjusted, from an unrevised €17.0 billion in April and its second-best performance so far in 2019.

Asia Pacific Markets

Major Asian markets sold off heavily Monday after stronger-than-expected US labor market data on Friday prompted investors to scale back expectations of policy easing by the Federal Reserve. Chinese shares were among the worst performers, with the Shanghai Composite index dropping 2.6 percent on the day, while Hong Kong’s Hang Seng index fell 1.5 percent. Japan’s Nikkei and Topix indices fell 1.0 percent and 0.9 percent respectively, while Australia’s All Ordinaries index closed down 1.1 percent.

The regional data calendar was light Monday. Japan's private sector machinery orders (excluding volatile items) fell 7.8 percent on the month in May after increasing 5.2 percent in April, weaker than the consensus forecast for a decline of 3.0 percent. The drop in headline growth in orders was broad-based, with both manufacturing and non-manufacturing orders posting large month-on-month declines. Despite weakness in both April and May, officials continue to forecast orders will rebound from a drop of 3.2 percent on the quarter in the three months to March to an increase of 15.7 percent in the three months to June, unchanged from their previous estimate.

Looking forward

On Tuesday, Italian retail sales are the only major economic report. Markets are anticipating the start of the US quarterly earnings season Tuesday, and the Fed Chair Jay Powell is scheduled to testify before Congress on Wednesday and Thursday morning in Washington, D.C.

Global Stock Markets

 

Index

8 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26806.14

-115.98

-0.4

 

NASDAQ

8098.38

-63.41

-0.8

 

S&P 500

2975.95

-14.46

-0.5

Canada

S&P/TSX Comp

16462.95

-79.04

-0.5

Europe

 

 

 

 

UK

FTSE 100

7549.27

-3.87

-0.1

France

CAC

5589.19

-4.53

-0.1

Germany

XETRA DAX

12543.51

-25.02

-0.2

Italy

MIB

21976

-9.79

0.0

Spain

Ibex 35

9284.7

-50.30

-0.5

Sweden

OMX Stockholm 30

1642.07

7.13

0.4

Switzerland

SMI

9994.1

13.88

0.1

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6757.41

-74.35

-1.1

Japan

Nikkei 225

21534.35

-212.03

-1.0

 

Topix

1578.4

-14.18

-0.9

Hong Kong

Hang Seng

28331.69

-443.14

-1.5

S. Korea

Kospi

2064.17

-46.42

-2.2

Singapore

STI

3334.23

-32.58

-1.0

China

Shanghai Comp

2933.36

-77.70

-2.6

Taiwan

TAIEX

10751.22

-34.51

-0.3

India

Sensex 30

38720.57

-792.82

-2.0

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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