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On 10 June 2019 - Stocks up on US-Mexico Trade News

Anne D Picker

Anne D Picker - Econoday

US large caps, automakers gain on relief over tariffs

US markets

US shares rose Monday on news President Trump had suspended his threat to impose tariffs on Mexico. Gains were across the board but automakers were among the leaders as the prospect of tariffs had threatened their US-Mexico operations.

The Dow industrials rose 0.3 percent; the S&P 500 gained 0.5 percent, and the NASDAQ was up 1.0 percent. GM rose 1.7 percent while Ford gained by 0.7 percent.

Big cap shares outperformed, with Microsoft up 0.8 percent, Amazon up 3.2 percent, and Apple up 1.3 percent. LyondellBasell Industries, a chemical manufacturer, rose 5.6 percent on news of a share buyback.

M&A activity added to market volatility. Raytheon rose 0.6 percent on news of a merger with United Technologies, but UTX weakened 3.3 percent on the news, including critical comments from Trump regarding the merger. Salesforce.com (down 5.3 percent) announced a deal to buy Tableau Software (up 34 percent).

The dollar rose while gold and oil prices retreated.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was down US$1.00 to $62.32 while gold was down US$10.60 at $1,328.40. The US dollar was higher against most major currencies. The yield on the US Treasury 30-year bond was up 5 basis points to 2.62 percent while the yield on the 10-year note was up 6 basis points at 2.14 percent.

European markets

European shares firmed as global markets continued to react to news President Trump had suspended his tariff threat against Mexico, plus expectations for a Fed rate cut spurred by Friday’s weak US jobs data.

Better sentiment on the trade front was offset in part by new belligerent rhetoric from Trump on the prospect of more tariffs to be imposed on China. Activity was limited by holidays in Germany and Switzerland.

The European STOXX 600 rose 0.2 percent, the French CAC rose 0.3 percent, and the UK FTSE 100 was up 0.6 percent. German and Swiss stock markets were closed for a public holiday.

Automakers improved on news suggesting Renault and Fiat Chrysler (both up about 1.5 percent) may revive their proposed merger after their deal fell apart last week. The US-Mexico trade news helped automakers too. Reports of a possible takeover for Thomas Cook by Fosun of China lifted the travel company by 17 percent in London trading.

UK data came in uniformly weak for April. A 0.4 percent monthly fall in total GDP, the steepest since March 2016, followed an unrevised 0.1 percent dip in March and reduced annual growth from 1.9 percent to 1.3 percent, its weakest print since last December. Quarterly growth slowed from 0.5 percent in January-March to 0.3 percent, fully reversing that period's pick-up.
Goods producers had a miserable April as output dropped a much sharper than expected 2.7 percent on the month, its steepest decline since September 2012. Following an unrevised 0.7 percent fall in March, this saw annual growth slide from 1.3 percent to minus 1.0 percent, its first negative print since last November.

The deficit on global goods trade weighed in at a smaller than expected £12.11 billion in April, but only after a sharply wider revised £15.43 billion shortfall in March. Even then, the monthly improvement masked a marked decline in both sides of the balance sheet as exports fell some 8.4 percent on the month while imports were off an even steeper 12.7 percent.

Asia Pacific Markets

Most Asian markets rallied Monday, following the lead set by US stocks on Friday as investors priced in a greater chance that Federal Reserve may ease policy and the US scrapped plans to impose tariffs on Mexico. Auto stocks were among the strongest performers across the region. Chinese trade data showing stronger export growth in May also provided some support to investor sentiment. The Shanghai Composite index and Hong Kong's Hang Seng index closed up 0.9 percent and 2.3 percent respectively after both markets were closed Friday, while Japan’s Nikkei and Topix indices closed up 1.2 percent and 1.3 percent respectively. Australia's share market was closed for a local holiday.

China's trade surplus in US dollar terms widened from US$13.84 billion in April to US$41.65 billion in May, well above the consensus forecast of US$28.5 billion, with both stronger exports and weaker imports driving this increase in the surplus. Exports advanced 1.1 percent on the year in May after falling 2.7 percent in April, mainly driven by a smaller year-on-year fall in exports to the United States and a small rebound in exports to Japan. Imports fell 8.5 percent on the year in May after rising 4.0 percent in April.

Revised GDP data showed slightly stronger economic growth in Japan in the three months to March. GDP rose 0.6 percent on the quarter, up from a preliminary estimate of 0.5 percent and also up slightly from 0.5 percent in the three months to December. The upward revision was mainly driven by private non-residential investment which was initially estimated to have fallen 0.3 percent on the quarter but is now estimated to have risen by 0.3 percent.

Looking forward

Tuesday will see the UK labor market report, and in the US, the producer price index. Second-tier US data include the NFIB small business optimism index, and the weekly Redbook store sales report. The US Treasury will sell three-year notes in the afternoon.

Global Stock Markets

 

Index

10 June 2019

Daily Change

% Change Daily

North America

United States

Dow

26062.68

78.74

0.3

 

NASDAQ

7823.17

81.07

1.0

 

S&P 500

2886.73

13.39

0.5

Canada

S&P/TSX Comp

16216.26

-14.70

-0.1

Europe

UK

FTSE 100

7375.54

43.60

0.6

France

CAC

5382.5

18.45

0.3

Germany

XETRA DAX

*

*

*

Italy

MIB

20484.99

124.40

0.6

Spain

Ibex 35

9294.1

58.00

0.6

Sweden

OMX Stockholm 30

1574.48

8.34

0.5

Switzerland

SMI

*

*

*

Asia/Pacific

Australia

All Ordinaries

*

*

*

Japan

Nikkei 225

21134.42

249.71

1.2

 

Topix

1552.94

20.55

1.3

Hong Kong

Hang Seng

27578.64

*

*

S. Korea

Kospi

2099.49

27.16

*

Singapore

STI

3188.11

21.82

0.7

China

Shanghai Comp

2852.13

*

*

Taiwan

TAIEX

10566.47

*

*

India

Sensex 30

39784.52

168.62

0.4

*Markets closed

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.