Skip Header

On 10 April 2019 - Global stocks mixed as EU leaders discuss another Brexit delay and US data shows steady inflation

Anne D Picker

Anne D Picker - Econoday

ECB leaves rates on hold, while Federal Reserve minutes suggest a rate hike may still be considered later.

US markets

US stocks were mixed Wednesday after the release of inflation data and FOMC minutes did little to alter investors views about the economic outlook. The Dow was flat on the day, the S&P advanced 0.3 percent, and the Nasdaq closed up 0.7 percent. Gains in the semiconductor and pharmaceuticals sectors helped drive the Nasdaq’s outperformance. Treasury Secretary Steven Mnuchin advised that US-China trade talks had made progress, with both sides having “pretty much” agreed on an enforcement mechanism.

US consumer prices data showed a modest increase in headline inflation but slightly weaker core inflation in March. The headline consumer price index increased 0.4 percent on the month in March, up from 0.2 percent in February and above the consensus forecast of 0.3 percent, while annual inflation accelerated from 1.5 percent to 1.9 percent, also just above the consensus forecast of 1.8 percent. Excluding food and energy, the index rose 0.1 percent on the month, as it did previously and just short of the 0.2 percent consensus forecast, and annual inflation moderated from 2.1 percent to 2.0 percent, also just below the 2.1 percent consensus forecast. Housing and medical care costs put upward pressure on underlying inflation, whereas year-on-year price changes were subdued for apparel, communication, and energy.

The Federal Reserve published the minutes of last month’s FOMC meeting Wednesday. Officials at this meeting discarded prior forecasts for one or two rate hikes later this year. Nevertheless, despite some speculation that officials may consider a rate cut later this year, the minutes indicate that the long-term bias may still be towards an eventual move higher in rates if the economy were to grow above its trend rate. The minutes also provided more details about the FOMC’s plans to scale down quantitative easing later this year.

These data reflect observations at 4:00 PM US ET. Gold rose US$4.00 to US$1,312.30 while dated Brent spot crude rose US$1.01 to US$71.61. The US dollar fell against the Australian dollar, the pound, the yen, and the euro, was flat against the Canadian dollar, and rose moderately against the yuan and the Swiss franc. The yield on the US Treasury 30-year bond fell 1 basis point to 2.90 percent while the yield on the 10-year note dropped 3 basis points to 2.47 percent.

European markets

European markets were also mixed Wednesday as European leaders debated whether to delay Brexit again and the European Central Bank left policy settings unchanged. The FTSE closed flat on the day, the CAC gained 0.2 percent, and the DAX rose 0.5 percent. Retail and real estate shares outperformed, offset by weakness among banks. Commerzbank fell after German Chancellor Angela Merkel said that any proposed merger with Deutsche Bank would be evaluated for potential risks to financial stability.

European Union leaders are discussing at a summit in Brussels how long to delay the United Kingdom’s withdrawal, previously scheduled to take place at the end of this week. UK Prime Minister Theresa May has requested an extension until the end of June but European Council President Donald Tusk has advocated a longer but flexible extension lasting for up to a year. All EU countries must agree to any further delay.

The ECB kept its main policy rate unchanged at 0.00 percent at its meeting Wednesday, in line with expectations. Officials also reaffirmed the extended forward guidance it adopted last month that indicates policy rates will remain at current levels through the end of 2019 and that its program of quantitative easing will continue beyond then. In his post-meeting press conference, ECB President Draghi advised that officials’ assessment of the economic outlook was little changed from last month with risks still tilted to the downside. The ECB’s next meeting will be in early June at which point it will update its economic forecasts.

Regional industrial production data published Wednesday showed better-than-expected growth in the United Kingdom, France, and Italy in February. French industrial production rose 0.4 percent on the month, well above the consensus forecast for a fall of 0.5 percent, while manufacturing output increased 1.1 percent, boosted by solid growth in transport equipment and the other manufactured goods category. Average industrial production growth for the first two months of the year is 1.1 percent above the mean level in the fourth quarter, suggesting that the sector is likely to make a positive contribution to real GDP growth in the first quarter. Italian industrial production rose 0.8 percent on the month, also defying expectations for a fall of 0.9 percent, with strong gains in consumer goods and capital goods. This also points to a positive contribution form the sector to first quarter real GDP growth, with the average growth for the first two months of the year 1.3 percent above the mean level for the fourth quarter.

UK industrial production rose 0.6 percent on the month in February, stronger than the consensus forecast for a drop of 0.1 percent, while manufacturing output rose 0.9 percent, also above the 0.2 percent consensus forecast. Growth in January was also revised higher. Stronger industrial production was a major factor driving better-than-expected monthly GDP data, also published Wednesday, which showed the economy expanded 0.2 percent on the month in February, compared with the consensus forecast for no change. Excluding potential revisions, the UK economy would need to contract by 1.4 percent in March for there to be a contraction in GDP for the first quarter as a whole. UK trade data, however, showed another high trade deficit in February of £14.11 billion, little changed from the upwardly revised deficit of £14.62 billion recorded in January.

Asia Pacific Markets

Asian markets were mixed. The Shanghai Composite index rose 0.1 percent, while Hong Kong’s Hang Seng index fell 0.1 percent. Japanese shares underperformed, with the Nikkei down 0.5 percent and the Topix closed 0.7 percent lower. India’s Sensex index was the weakest performer in the region, closing down 0.9 percent ahead of the start of voting for national elections. Voting starts Thursday and will continue in phases until mid-May.

Japanese data showed stronger-than-expected producer price inflation and a solid rebound in machine orders. Producer price inflation picked up from 0.9 percent in February to 1.3 percent in March, above the consensus forecast of 1.0 percent, largely reflecting a rebound in the prices of petroleum and coal products. Private sector machinery orders (Excluding volatile items) rose 1.8 percent on the month in February after falling 5.4 percent in January, with growth picking up for both manufacturing and non-manufacturing orders. Officials expect private sector machinery orders (excluding volatile items) to fall 0.9 percent on the quarter in the three months to March, unchanged from their previous estimate.

Looking forward

Chinese inflation data will be published shortly, with French and German inflation data also scheduled for release Thursday. Producer price and jobless claims data are the main highlights of the US data calendar, with several Federal Reserve officials also set to speak.

Global Stock Markets

 

Index

10 Apr 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26157.16

6.58

0.0

 

NASDAQ

7964.24

54.96

0.7

 

S&P 500

2888.21

10.01

0.3

Canada

S&P/TSX Comp

16396.29

59.84

0.4

Europe

 

 

 

 

UK

FTSE 100

7421.91

-3.66

0.0

France

CAC

5449.88

13.46

0.2

Germany

XETRA DAX

11905.91

55.34

0.5

Italy

MIB

21671.76

-0.02

0.0

Spain

Ibex 35

9406.5

-1.30

0.0

Sweden

OMX Stockholm 30

1628.55

11.99

0.7

Switzerland

SMI

9556.31

-25.91

-0.3

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6316.46

0.97

0.0

Japan

Nikkei 225

21687.57

-115.02

-0.5

 

Topix

1607.66

-11.10

-0.7

Hong Kong

Hang Seng

30119.56

-37.93

-0.1

S. Korea

Kospi

2224.39

10.83

0.5

Singapore

STI

3327.65

2.05

0.1

China

Shanghai Comp

3241.93

2.27

0.1

Taiwan

TAIEX

10868.14

16.54

0.2

India

Sensex 30

38585.35

-353.87

-0.9

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.