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On 10 October 2019 - US, Europe up on Trump trade tweet; Asia firm

Anne D Picker

Anne D Picker - Econoday

US Treasuries fall in risk-on move; Apple leads tech stocks again.

US markets

Though ending below session highs, US equities rose Thursday on President Trump’s tweet that he would meet Chinese Deputy Premier Liu He on Friday for trade talks. The Dow industrials, the S&P 500, and the NASDAQ all rose 0.6 percent.

Apple, up 1.4 percent, and its suppliers, rose on analyst upgrades amid expectations for strong sales of the new iPhone. Trade-sensitive semiconductors advanced on the Trump trade tweet, with sector leader Intel up 1.3 percent. Energy stocks rose on a crude oil price rally, with supermajor Conoco Philips up 1.7 percent. Financials outperformed in response to rising interest rates, with money center banks leading, including Citigroup, up 1.8 percent.

Among companies in the news, Delta Airlines dropped 1.5 percent after cutting its guidance and reporting weak traffic. Bed, Bath & Beyond, the household goods retailer, soared 22 percent after naming a new CEO, Mark Tritton, formerly of retail giant Target. Markets had viewed the CEO succession as a big problem for the firm. Costco, the retailer, rose 0.1 percent after reporting stronger-than-expected store sales. United States Steel gained 0.5 percent after raising its quarterly guidance.

In US economic news, the inflation outlook has softened, underscored by a lower-than-expected 0.1 percent September rise in the core CPI that follows this week's decline for producer prices and the prior week's flattening out in average hourly earnings. The core's year-on-year rate did hold unchanged at a respectable 2.4 percent as did the overall rate at a soft 1.7 percent, the latter reflecting an as-expected no change in the monthly showing. On the labor front, initial claims for unemployment benefits in the October 5 week fell 10,000 to a 210,000 level that is at the favorable end of Econoday's consensus range.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.02 to US$59.25, while gold fell by US$14.40 to US$1,498.90. The US dollar fell against most major currencies as its risk-haven status diminished, and sterling in particular rallied on Brexit news. The US Treasury 30-year bond yield jumped 7 basis points to 2.16 percent while the 10-year note yield rose 8 basis points to 1.66 percent.

European markets

European equities rose Thursday on favorable US-China trade headlines and hopes for a last-minute Brexit deal. The Europe-wide STOXX 600 rose 0.7 percent, the German DAX gained 0.6 percent, the French CAC jumped 1.3 percent, and the UK FTSE-100 rose 0.3 percent.

In trade news, President Trump’s tweet that he would meet with Chinese Deputy Premier Liu He on Friday lifted market sentiment, despite other reports that said there was no progress in the trade talks. On Brexit, markets reacted to reports that UK and Irish prime ministers see a path to a Brexit deal. Sterling’s rise on the news limited UK gains in the export-heavy FTSE-100.

Among shares in the Stoxx 600, outperformers included basic resources, autos & parts, banks, and chemicals. Underperformers included defensive sectors -- food & beverage, utilities, health care, and real estate. Luxury goods shares helped the CAC outperform for a second straight day, with fashion retailer LVMH up 5.6 percent Thursday after blowing past sales forecasts in the third quarter, despite worries about the key Hong Kong market.

In economic news, UK GDP ran out of steam in August. Following a slightly stronger revised 0.4 percent monthly rise in July, total output contracted 0.1 percent. This still saw 3-monthly growth rise from 0.1 percent to 0.3 percent, its highest outturn since the three months ended April, but annual growth fell from 1.3 percent to 1.1 percent, equalling its lowest mark in the last couple of years.

Separately, French industrial goods production (ex-construction) unexpectedly fell in August. A 0.9 percent monthly decline followed an unrevised 0.3 percent advance in July and put annual output growth at minus 1.4 percent, down from zero percent last time and its weakest post since December 2018. Meanwhile, UK goods production also undershot market expectations in August. A 0.6 percent monthly fall more than reversed a 0.1 percent rise in July and put annual output growth at minus 1.8 percent, a 0.7 percentage point drop from last time and a new 2019 low.

Asia Pacific markets

Most major Asian markets closed little changed or moderately stronger Thursday, though moves during the session were in some places volatile as investors reacted to US-China trade headlines. Reports early in the session suggested that prospects for the trade talks due to start in Washington Thursday were not promising and that the Chinese trade delegation might return home earlier than expected, though sentiment improved after other reports indicated that the US government may suspend tariff increases planned to take effect next week and could ease restrictions on US companies doing business with China’s Huawei Technologies Co.

The Shanghai Composite index closed with the strongest gains in the region Thursday, up 0.8 percent on the day, while Japan’s Nikkei index advanced 0.5 percent. Hong Kong’s Hang Seng index advanced just 0.1 percent, Japan’s Topix index closed flat, and Australia’s All Ordinaries index fell 0.1 percent. Korea’s KOSPI index fell 0.9 percent after Wednesday’s holiday.

Japanese data published Thursday showed further weakness in producer prices and machine orders. Japan's producer price index fell 1.1 percent on the year in September, weakening further from a decline of 0.9 percent in August. Headline PPI inflation has now fallen for six consecutive months, has been in negative territory for four consecutive months, and is now at its lowest level since late 2016. Weaker price pressures were broad-based across major categories and broadly in line with PMI survey data. This will likely reinforce concerns among officials at the Bank of Japan that there may be a loss of "momentum" toward meeting their inflation target, a condition they have advised would prompt further policy easing. Japan's private sector machinery orders (excluding volatile items) fell 2.4 percent on the month (seasonally adjusted) in August after dropping 6.6 percent in July. Although headline growth in orders improved in August, orders fell on the month for both major categories, manufacturing and non-manufacturing.

Australian housing data showed the number of home loans grew a seasonally adjusted 1.8 percent in August, down from revised growth of 5.5 percent in July, but the first time loans have increased in consecutive months since early 2018. This is broadly in line with comments made by officials at the Reserve Bank of Australia at their policy meeting last week pointing to "further signs of a turnaround" in established housing markets, especially in the two largest cities, Sydney and Melbourne.

Looking forward

Late on Friday in Asia, Indian industrial production is due. In Europe, German CPI figures are scheduled. In North America, the Canadian labor force survey, US consumer sentiment, US import and export price reports are scheduled.

Global stock markets

 

 

Index

10 Oct 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26496.67

150.66

0.6

 

 

NASDAQ

7950.78

47.04

0.6

 

 

S&P 500

2938.13

18.73

0.6

Canada

S&P/TSX Comp

16422.68

42.80

0.3

Europe

 

 

 

 

UK

FTSE 100

7186.36

19.86

0.3

France

CAC

5569.05

69.91

1.3

Germany

XETRA DAX

12164.2

69.94

0.6

Italy

MIB

21756.39

222.75

1.0

Spain

Ibex 35

9104.4

112.50

1.3

Sweden

OMX Stockholm 30

1630.03

10.03

0.6

Switzerland

SMI

9903.02

72.97

0.7

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6662.89

-4.13

-0.1

Japan

Nikkei 225

21551.98

95.60

0.5

 

 

Topix

1581.42

-0.28

0.0

Hong Kong

Hang Seng

25707.93

25.12

0.1

S. Korea

Kospi

2028.15

-18.10

-0.9

Singapore

STI

3089.48

-0.42

0.0

China

Shanghai Comp

2947.71

22.85

0.8

Taiwan

TAIEX

*

*

*

India

Sensex 30

37880.4

-297.55

-0.8

*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.