On 10 January, 2019 - US stocks advance for a fifth consecutive day

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Anne D Picker - Econoday

11 January 2019

Retailers disappointed but jobless claims were solid.

US markets

US stocks posted modest gains but a fifth consecutive increase Thursday after further supportive comments from Fed Chairman Jerome Powell and jobless claims data pointing to a solid payrolls report for January. The Dow and the S&P both advanced 0.5 percent, while Nasdaq closed the day up 0.4 percent.

Thursday’s comments from Fed Chairman Jerome Powell were broadly in line with previous statements. Chairman Powell noted that incoming data, highlighted by last week's surge in nonfarm payrolls, are not showing indications of an economic slowdown and that he doesn't see the risk of a recession in the near term. Turning to the policy outlook, he again stressed there is no preset path set for interest rates and that the Fed can be patient to see how economic risks play out. Chairman Powell also noted that the Fed’s balance sheet should be “substantially smaller” but provided no guidance on timing.

St Louis Fed President James Bullard also spoke, noting that he had argued against the rate hike made in December and will only support an increase if inflation expectations pick up. A Wall Street Journal survey of 73 private-sector economists found most respondents expect the Fed to stay on hold until mid-year at least.

Wholesale trade data scheduled for release Thursday were delayed by the government shutdown but jobless claims data were published and pointed to a solid start to 2019 for the labour market. Initial claims for the January 5 week fell 17,000 to 216,000, close to the lower end of the consensus range, while the four-week average provides an early hint for a favorable employment report for January. Claims filed by Federal employees rose as the shutdown continues.

Despite recent indicators suggesting consumer spending had remained solid over the holiday period, Macy’s fell sharply after the department store chain reported weak December sales and lowered its full-year guidance. Other major retailers also reported subdued holiday sales, with reports indicating that the trend towards online shopping remains strong.

These data reflect observations at 4:00 PM US ET. Gold was down US$4.80 to US$1287.20. Copper futures were down 0.81 percent to US$2.64. WTI spot crude was up 19 US cents to US$52.56. Dated Brent spot crude was up 11 US cents to US$61.55. The US dollar advanced against the yen, euro, pound, Swiss franc and the Canadian dollar. It retreated against the Australian dollar. The yield on the US Treasury 30 year bond was up 2 basis points to 3.04 percent while the 10 year note was up 1 basis point to 2.73 percent.

European markets

Major European indices were mixed, with weaker-than-expected French industrial production the main highlight of the regional news flow. The FTSE advanced 0.5 percent, while the DAX closed the day up 0.3 percent and the SMI jumped 1.3 percent. The CAC retreated 0.2 percent.

French data showed a sharp slowdown in industrial production in November, down 1.3 percent on the month after an increase of 1.3 percent in October, falling short of the consensus forecast for no change and the sector’s weakest performance since January. In year-on-year terms, output fell 2.1 percent in November after a drop of 0.6 percent in October, the biggest fall since November 2014. Average production for October and November is well below the average for the three months to September, implying that growth in December will need to be implausibly strong just to keep output flat on the quarter. With German data published earlier in the week also poor, the outlook for Eurozone goods output for the current quarter is unpromising.

The ECB published the minutes of its December meeting Thursday and confirmed a still generally upbeat view of the Eurozone economy. Officials consider underlying inflation pressures to be generally muted and risks to the growth outlook to be broadly balanced. Forward guidance for policy rates was left unchanged, with an increase later this year still far from certain.

Asia Pacific Markets

Asia Pacific markets were mixed Thursday. The Singapore STI was the strongest regional performer, up 0.8 percent on the day, while Australia’s All Ordinaries Index and Hong Kong’s Hang Seng Index recorded modest gains. Korea’s Kospi index was little changed on the day, while stocks fell moderately in China, Taiwan, and India. After three days of gains, Japanese stock markets were the worst performers, with the Nikkei dropping 1.3 percent and the Topix down 0.9 percent.

Chinese inflation data published Thursday showed weaker price pressures, with headline consumer inflation falling from 2.2 percent in November to 1.9 percent in December and producer inflation falling more sharply from 2.7 percent to 0.9 percent. In annual terms, Chinese consumer inflation increased from 1.6 percent in 2017 to 2.1 percent in 2018 but fell short of the Chinese government's target of "around 3.0 percent". Officials will announce a target for 2019 in coming weeks.

Comments from Bank of Japan Governor Haruhiko Kuroda Thursday were in line with the assessment made by officials at the last policy meeting in December. Despite recent volatility in financial markets, Governor Kuroda remains confident the Japanese economy will continue its “moderate” expansion and still expects headline inflation to increase towards the BoJ’s 2.0 percent target.

Looking forward

Japanese household spending data will be published shortly. US CPI inflation data will be the main focus Friday, with Fed Chairman Jerome Powell recently citing “muted” price pressures as a key factor influencing the policy outlook. UK monthly GDP, industrial production and merchandise trade data are also scheduled for release. Italian industrial production data Friday follows weak German and French numbers earlier in the week.

Global Stock Markets

 

Index

Jan 10 2019

Daily Change

% Change Daily

North America

United States

Dow

24001.92

122.80

0.5

 

NASDAQ

6986.07

28.99

0.4

 

S&P 500

2596.64

11.68

0.5

Canada

S&P/TSX Comp

14903.49

98.76

0.7

Europe

UK

FTSE 100

6942.87

36.24

0.5

France

CAC

4805.66

-7.92

-0.2

Germany

XETRA DAX

10921.59

28.27

0.3

Italy

MIB

19300.74

121.58

0.6

Spain

Ibex 35

8856.80

33.20

0.4

Sweden

OMX Stockholm 30

1470.69

0.18

0.0

Switzerland

SMI

8801.48

113.77

1.3

Asia/Pacific

Australia

All Ordinaries

5853.93

15.57

0.3

Japan

Nikkei 225

20163.80

-263.26

-1.3

 

Topix

1522.01

-13.10

-0.9

Hong Kong

Hang Seng

26521.43

59.11

0.2

S. Korea

Kospi

2063.28

-1.43

-0.1

Singapore

STI

3183.51

25.44

0.8

China

Shanghai Comp

2535.10

-9.24

-0.4

Taiwan

TAIEX

9720.69

-17.62

-0.2

India

Sensex 30

36106.50

-106.41

-0.3

Data Source: Haver Analytics

Note: all releases are listed in local time.

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