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On 9 April 2019 - Global stocks drop as US-EU trade tensions renew concerns about global growth outlook

Anne D Picker

Anne D Picker - Econoday

European Union leaders set to offer another extension to Brexit.

US markets

US stocks fell Tuesday on renewed concerns about trade tensions and the global growth outlook. The Dow fell 0.7 percent on the day, while the S&P and the Nasdaq both fell 0.6 percent. Trade-sensitive stocks such as Caterpillar and Advanced Micro Devices were among the weaker performers.

President Trump indicated Tuesday that the US may impose tariffs on US$11 billion worth of products from European Union in response to an ongoing trade dispute about the impact of government subsidies to aircraft manufacturers. The World Trade Organisation is expected to rule on this dispute soon.  Global trade tensions were cited by the International Monetary Fund as one of the major factors driving a downward revision to its global growth forecasts. The IMF now expects the global economy to expand by 3.3 percent in 2019, down from estimates of 3.5 percent in January and 3.7 percent in October.

The Redbook survey of retail sales showed some improvement in in the April 6 week, with year-on-year growth in sales picking up to 4.8 percent from 4.4 percent the previous week. The late timing of Easter this year will likely boost reported sales growth in the next few weeks. The National Federation of Independent Business’ Small Business Optimism Index was little changed in March at 101.8, up slightly from 101.7 in February, indicating that conditions for survey respondents remain subdued. This index had been in the 105 to 110 range for most of last year before falling to the low 100 area beginning this year.

These data reflect observations at 4:00 PM US ET. Gold rose US$6.70 to US$1,308.60 while dated Brent spot crude fell US$0.45 to US$70.65. The US dollar fell slightly against the yen but was flat or only little changed against other major currencies. The yield on the US Treasury 30-year bond fell 2 basis points to 2.91 percent while the yield on the 10-year note dropped 2 basis points to 2.50 percent.

European markets

European markets also closed lower Tuesday, with gains early in the session reversing as concerns about trade and growth weighted on investor sentiment. The FTSE fell 0.4 percent, the CAC closed down 0.6 percent, and the DAX underperformed with a decline of 0.9 percent. Aircraft manufacturer Airbus and many of its key European suppliers were among the weaker performers on the day after US authorities indicated that commercial aircraft would be included among the products subject to any tariffs that might be imposed.

The European Central Bank’s quarterly lending survey found that overall credit standards eased moderately in the three months to March. This headline easing in standards was mainly driven by lending to enterprises, with credit standards tightening moderately for home loans and for consumer credit and other loans. For the new quarter, surveyed banks expect standards to ease for lending to enterprises and consumer credit but to tighten for home loans. Net loan demand by enterprises was flat, demand for consumer credit rose at a slower pace, and demand for home loans accelerated.

Italian retail sales data suggest consumer spending will make a small positive contribution to headline GDP growth for the first quarter of the year. Sales rose 0.1 percent on the month in February after revised growth of 0.6 percent in January, with the average for the two months some 0.3 percent above the fourth quarter mean. Food sales contracted 0.6 percent on the month, with non-food sales up 0.5 percent. Switzerland’s seasonally-adjusted unemployment rate was steady at 2.4 percent in March.

The United Kingdom is scheduled to exit the European Union on Friday, April 12, with no deal in place. Ahead of the EU leaders summit on Wednesday, European Council president Donald Tusk has suggested that the UK be offered a flexible extension to Brexit for up to twelve months, with the option of withdrawal taking place earlier if a deal can be agreed.

Asia Pacific Markets

Asian markets were mixed but generally little changed on the day. The Shanghai Composite index fell 0.2 percent, while Hong Kong’s Hang Seng index advanced 0.3 percent. In Japan, the Nikkei gainied 0.2 percent and the Topix closed down 0.1 percent. Australia’s All Ordinaries index rose 0.1 percent on the day, while India’s Sensex index was the strongest performer in the region, closing up 0.6 percent.

The Asia data calendar was again sparse on Tuesday. Australian data showed a rebound in the number of home loans in February, up 2.0 percent after a sharp fall of 2.5 percent in January, with the value of these loans also picking up after contracting previously. Lending for investment homes also rose in February after several months of weakness. Reports suggest that the declines in Australian house prices seen over the last year may be moderating, perhaps encouraging borrowers to re-enter the housing market, though lending remains well down in year-on-year terms.

Looking forward

Japanese producer price and machine orders data will be published shortly. The European Central Bank policy decision will be the main focus of the European data calendar Wednesday, with industrial production data also scheduled to be released for France, Italy and the United Kingdom. US inflation data and the FOMC minutes are the main highlights of the US data calendar.

Global Stock Markets

 

Index

9 Apr 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26150.58

-190.44

-0.7

 

NASDAQ

7909.28

-44.60

-0.6

 

S&P 500

2878.2

-17.57

-0.6

Canada

S&P/TSX Comp

16336.45

-70.84

-0.4

Europe

 

 

 

 

UK

FTSE 100

7425.57

-26.32

-0.4

France

CAC

5436.42

-35.36

-0.6

Germany

XETRA DAX

11850.57

-112.83

-0.9

Italy

MIB

21671.78

-100.18

-0.5

Spain

Ibex 35

9407.8

-29.90

-0.3

Sweden

OMX Stockholm 30

1616.56

-7.96

-0.5

Switzerland

SMI

9582.22

34.89

0.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6315.49

4.73

0.1

Japan

Nikkei 225

21802.59

40.94

0.2

 

Topix

1618.76

-1.38

-0.1

Hong Kong

Hang Seng

30157.49

80.34

0.3

S. Korea

Kospi

2213.56

2.96

0.1

Singapore

STI

3325.6

10.18

0.3

China

Shanghai Comp

3239.66

-5.15

-0.2

Taiwan

TAIEX

10851.6

51.03

0.5

India

Sensex 30

38939.22

238.69

0.6

Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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