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On 8 March 2019 - Global markets declined

Anne D Picker

Anne D Picker - Econoday

Stocks extend losses on Chinese trade, European manufacturing, and US labour data.

US markets

US stocks rallied late in the session but closed lower Friday, extending losses made over the week. The Dow fell 0.1 percent on the day and 2.2 percent on the week, the S&P lost 0.2 percent on the day and also 2.2 percent on the week, and the Nasdaq retreated 0.2 percent on the day and 2.5 percent on the week. Retailer Costco Wholesale posted a solid gain Friday after reporting stronger-than-expected quarterly profits, with its performance boosted by lower fuel prices and an easing of pricing pressures from competitors. The company also announced it would increase its starting wages for US and Canadian employees in response to tighter labour market conditions.

February’s employment report published Friday showed payrolls rose only 20,000, well below the consensus forecast of 175,000 and sharply down from a revised increase of 311,000 in January. The impact of the US government shutdown and difficulties with the seasonal adjustment of data during the winter months may explain much of this volatility in the payrolls data in January and February, and the average increase of 166,000 for the two months is strong. Other indicators suggest that conditions in the labour market remain positive, with the unemployment rate falling from 4.0 percent to 3.8 percent, and average hourly earnings up 0.4 percent on the month and 3.4 percent on the year. Housing data suggest there has been a solid rebound in activity after weakness in December, which had partly reflected the impact of severe wildfires in California. Housing starts rose from a revised 1.037 million in December to 1.230 million in January, with permits, less impacted by weather conditions, also picking up from 1.345 million to 1.326 million.

Federal Reserve Chair Jerome Powell spoke Friday after the employment report and the after close of trading. His comments are to be the last from Fed officials until after the FOMC meeting next week but were in line with previous statements. He noted that officials are “well along” in plans to end the runoff of the Fed’s balance sheet and will seek to do so in a way that minimises market disruption. He also argued that incoming data were consistent with the FOMC’s patient “wait-and-see” approach to further policy moves but stressed that projections of policy rates should not be interpreted as promises.

Canada’s employment report showed payrolls rose 55,900 in February, down from an increase of 66,800 in January but well above the consensus forecast for an increase of 11,000. This puts the average for the first two months of the current quarter well above the average posted in the previous two quarters. Employment increases were largely concentrated in Ontario but broad-based across most sectors with the exception of construction. The unemployment rate was steady at 5.8 percent. Consistent with the data showing a drop in construction payrolls, housing starts data showed a sharp fall on the month. 

These data reflect observations at the close of trading Friday. Gold rose US$13.20 to US$1,299.30 while dated Brent spot crude fell US$0.56 to US$65.74. The US dollar made moderate gains against the pound and the yuan Friday but weakened against other major currencies. The yield on the US Treasury 30 year bond fell 3 basis points to 3.00 percent while the 10 year note fell 1 basis point to 2.63 percent.

European markets

Most European markets closed lower Friday and on the week. The FTSE fell 0.7 percent on the day and was flat on the week, the CAC lost 0.7 percent on the day and 0.6 percent on the week, and the DAX closed down 0.5 percent on the day and 1.2 percent on the week. Deutsche Bank and Commerzbank both closed lower Friday on reports that merger talks between the two banks had resumed. Such a merger would create Europe’s second largest bank. Further reports along these lines were published over the weekend but both companies have declined to comment. 

German manufacturers’ orders data published Friday suggest that the manufacturing sector is unlikely to make a significant positive contribution to headline growth in the three months to March. Although orders were revised higher in December, up 0.9 percent compared with a previous estimate for a drop of 1.6 percent, they are estimated to have fallen by 2.6 percent in January, and to have fallen on the year for an eighth consecutive month. Both external demand and domestic demand were weak, while orders for capital goods, intermediate goods, and consumer goods were also uniformly weak.

French industrial production growth was stronger-than-expected in January but revised down in December. Output rose 1.3 percent on the month in January but was flat in December down from an initial estimate of 0.8 percent, with year-on-year growth picking up from a decline of 2.5 percent to an increase of 1.7 percent. Machinery and equipment goods, coke and refined petroleum products, and other manufacturing recorded solid increases, offset by weakness in transport equipment and the construction sector. France’s trade deficit widened from a revised €3.57 in December to €4.20 in January.

Italian industrial production also rebounded in January, up 1.7 percent on the month after falling 0.7 percent in December, with year-on-year growth also improving from a drop of 5.5 percent to a more modest decline of 0.8 percent. This improvement was broad-based across categories. Yet with Spain, like France and Italy, showing a similar rebound in its industrial production data in January, it may be that there are some issues with the seasonal adjustment of these data around the turn of the year. 

Brexit negotiations continued over the weekend ahead of key votes in the UK parliament this week. UK Prime Minister Theresa May has promised to present a revised deal to parliament by March 12 and, should this be rejected, to hold a vote on March 13 on whether the UK should withdraw with no deal in place. If this vote also fails, parliament will vote on March 14 on whether to seek to delay withdrawal. If this vote is rejected, Brexit will likely proceed as scheduled with no deal in place, while if passed the UK government will then seek the European Union's approval to delay withdrawal.

Asia Pacific Markets

Asian markets fell Friday with most closing down on the week. The Shanghai Composite index posted a particularly sharp decline Friday, slumping 4.4 percent on the day and unwinding all of the gains made earlier to close down 0.8 percent on the week. The fall on Friday followed trade data that showed a larger-than-expected fall in exports in February which, despite distortions in the data caused by the timing of lunar new year holidays, prompted renewed concerns about the outlook for the Chinese economy.

Japanese markets also closed lower Friday, with the Nikkei falling 2.0 percent on the day and 2.7 percent on the week and the Topix losing 1.8 percent on the day and 2.7 percent on the week. Hong Kong’s Hang Seng index, Korea’s Kospi index and Singapore’s STI index also closed lower on the day and on the week. Australia’s All Ordinaries index was the region’s best performer, closing Friday down a comparatively less severe 0.9 percent and ending the week 0.2 percent higher.

Chinese trade data published Friday showed a sharp fall in the surplus from US$39.16 billion in January to US$4.12 billion in February. Exports fell 20.7 percent on the year in February, down sharply from an increase of 9.1 percent in January, while imports fell 5.2 percent, also down from a decline of 1.5 percent previously.  These moves, however, reflect to a significant extent the impact of the timing of lunar new year holidays. Looking at January and February data combined likely provides a clearer picture of underlying trade performance and so shows the average trade surplus for the two months at US$21.64 billion. Exports for January and February combined fell 4.6 percent compared with the same period in 2018 while imports fell 3.1 percent. Chinese inflation data released over the weekend showed headline consumer price inflation fell from 1.7 percent in January to 1.5 percent in February, mainly reflecting the impact of food prices, while headline producer price inflation was unchanged at 0.1 percent. 

Japan GDP data Friday revised up estimated economic growth in the three months to December and confirmed a rebound in activity after natural disasters contributed to a sharp contraction in the three months to September. GDP grew 0.5 percent on the quarter, above the preliminary estimate of 0.3 percent, and up from a decline of 0.6 percent previously. Private consumption and private non-residential investment spending were both significantly stronger in the three months to December compared with the three months to September. Also published Friday, household spending data showed an increase of 0.7 percent in January after a 0.1 percent decline in December, with year-on-year growth accelerating from 0.1 percent to 2.0 percent.

Looking forward

Central Bank activities

Mar-14

Japan

Bank of Japan Announcement

The following indicators will be released this week...

Europe

   

Mar-11

Germany

Industrial Production (January)

   

Merchandise Trade (January)

Mar-12

UK

Monthly GDP (January)

   

Industrial Production (January)

Mar-13

Eurozone

Industrial Production (January)

Mar-14

Germany

CPI (February)

 

France

CPI (February)

Mar-15

Italy

CPI (February)

Asia Pacific

Mar-12

India

Industrial Production (January)

 

Japan

Machine Orders (January)

Mar-14

China

Industrial Production (February)

   

Retail Sales (February)

Americas

Mar-11

US

Retail Sales (January)

Mar-12

US

CPI (February)

Mar-13

US

Durable Goods Orders (January)

   

Construction Spending (January)

Mar-14

US

New Home Sales (January)

Mar-15

US

Industrial Production (February)

Global Stock Markets

 

Index

Mar 8 2019

Daily Change

% Change Daily

North America

United States

Dow

25450.24

-22.99

-0.1

 

NASDAQ

7408.14

-13.32

-0.2

 

S&P 500

2743.07

-5.86

-0.2

Canada

S&P/TSX Comp

15996.21

-60.30

-0.4

Europe

UK

FTSE 100

7104.31

-53.24

-0.7

France

CAC

5231.22

-36.70

-0.7

Germany

XETRA DAX

11457.84

-59.96

-0.5

Italy

MIB

20484.39

-213.17

-1.0

Spain

Ibex 35

9129.30

-120.60

-1.3

Sweden

OMX Stockholm 30

1558.63

-0.28

0.0

Switzerland

SMI

9268.36

-56.22

-0.6

Asia/Pacific

Australia

All Ordinaries

6287.08

-57.13

-0.9

Japan

Nikkei 225

21025.56

-430.45

-2.0

 

Topix

1572.44

-29.22

-1.8

Hong Kong

Hang Seng

28228.42

-551.03

-1.9

S. Korea

Kospi

2137.44

-28.35

-1.3

Singapore

STI

3195.87

-33.61

-1.0

China

Shanghai Comp

2969.86

-136.56

-4.4

Taiwan

TAIEX

10241.75

-69.93

-0.7

India

Sensex 30

36671.43

-53.99

-0.1

*Markets closed
Source: Haver Analytics

Note: all releases are listed in local time.

Important Information

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.