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On 11 June 2019 - US stocks fade as rally loses steam on Trump trade threats

Anne D Picker

Anne D Picker - Econoday

Trade worries offset reports of new China stimulus.

US markets

US shares gave up good early gains to end flat to marginally weaker Tuesday as buying enthusiasm faded following five days of advances. Threats from President Trump to hold up a US-China trade deal renewed trade worries and capped the recent rally.

Early gains of 0.8 percent in the S&P 500 were spurred in part by news that China would allow its local governments to step up borrowing to boost infrastructure spending, which initially lifted shares of manufacturers and mining firms. The market has been in a better mood since Friday’s news that Trump would not impose tariffs on Mexico. On Tuesday, however, Trump said he would hold up any trade deal with China unless China agrees to additional unspecified terms.

The Dow industrials eased by 0.1 percent; the S&P 500 was little changed, easing by 0.03 percent, as was the NASDAQ, down 0.01 percent. Industrial stocks turned down, led by aerospace and defense stocks, with Raytheon (down 5 percent) and United Technologies (down 4 percent) on comments from Trump casting doubt on the firms’ proposed merger.

Communications services shares did better, led by Facebook, up 1.9 percent. Video game retailer GameStop rose by 4.8 percent on news of a large share buyback.

Sprint and T-Mobile weakened by 5.7 percent and 1.6 percent, respectively, on news that several state attorneys general would seek to block the firms’ proposed merger.

Shares of market phenom Beyond Meat collapsed by 25 percent after JP Morgan downgraded the shares.

In economic news, US producer prices rose by an as-expected 0.1 percent in May with the year-on-year rate, however, missing expectations with a 4-tenths slowing to 1.8 percent. PPI excluding food & energy held up better with an as-expected 0.2 percent monthly gain with the year-on-year rate hitting expectations with a 1 tenth decline to 2.3 percent. When excluding food, energy and trade services, producer prices rose a stronger-than-expected 0.4 percent for also a 2.3 percent yearly rate.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was unchanged at US$62.32 while gold was down US$1.40 at $1,327.00. The US dollar rose versus the Swiss franc and was up marginally against the yen and the Canadian dollar; it was weaker against most other major currencies. The yield on the US Treasury 30-year bond was unchanged at 2.62 percent while the yield on the 10-year note was unchanged at 2.14 percent.

European markets

European shares gained, with German stocks leading, as markets reacted to new Chinese stimulus, and a better mood on trade as US-Mexico trade tensions cooled.

Mining and manufacturing shares in particular were lifted by news that China’s Ministry of Finance would let local governments expand their use of debt to speed up infrastructure construction.

The European STOXX 600 rose 0.7 percent, the French CAC rose 0.5 percent, and the UK FTSE 100 was up 0.3 percent.

After being out Monday, German markets caught up Tuesday in reacting to President Trump’s decision not to impose tariffs on imports from Mexico. The DAX outperformed, rising 0.9 percent. Automakers VW rose 1.3 percent, and Daimler rose 1.8 percent.

In London, miners Rio Tinto rose 2.4 percent and BHP rose 2.3 percent.

In economic news, UK labour data were mixed in April/May. Claimant count joblessness rose a further 23,200 last month, extending the uptrend that began back in late 2017. This added another tick to the unemployment rate, which now stands at 3.1 percent.  The ILO data also showed unemployment in the three months to April climbing 6,000 from Q1 to 1.304 million. This followed a smaller revised 45,000 fall in the first quarter and left the rate at 3.8 percent, in line with expectations and equaling its lowest mark since the fourth quarter of 1974. However, at the same time, employment advanced 49,000 to a record high of 32.75 million.

Asia Pacific Markets

Most Asian markets closed higher Tuesday, with Chinese shares the strongest regional performer on signs that officials are supporting higher infrastructure spending to help boost domestic growth. The Shanghai Composite index closed up 2.6 percent, with strong gains from construction-related stocks, including China Railway Construction, China Communications Construction and Anhui Conch Cement. Official media reported that the State Council has encouraged local governments to use the proceeds from special bonds to finance infrastructure projects. Hong Kong’s Hang Seng index was also boosted by this news and closed the day up 0.8 percent.

Elsewhere in the region, economic news was limited, and market moves generally subdued. Japan’s Nikkei and Topix indices advanced 0.3 percent and 0.5 percent respectively, while Korea’s Kospi index closed up 0.6 percent. Australia’s All Ordinaries index gained 1.5 percent Tuesday, catching up with other markets after trading was closed for a local holiday Monday.

Looking forward

Wednesday will see Chinese CPI and PPI data. From Japan, machine orders and PPI. In the US, the PPI report, monthly Treasury budget, the Atlanta Fed business inflation expectations, EIA petroleum data, and finally, the US Treasury 10-year note auction. From India: CPI and industrial production data.

Global Stock Markets

 

Index

11 Jun 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26048.51

-14.17

-0.1

 

NASDAQ

7822.57

-0.60

0.0

 

S&P 500

2885.72

-1.01

0.0

Canada

S&P/TSX Comp

16248.76

32.50

0.2

Europe

 

 

 

 

UK

FTSE 100

7398.45

22.91

0.3

France

CAC

5408.45

25.95

0.5

Germany

XETRA DAX

12155.81

*

*

Italy

MIB

20609.7

124.71

0.6

Spain

Ibex 35

9282.1

-12.00

-0.1

Sweden

OMX Stockholm 30

1593.36

18.88

1.2

Switzerland

SMI

9835.87

*

*

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6624.45

*

*

Japan

Nikkei 225

21204.28

69.86

0.3

 

Topix

1561.32

8.38

0.5

Hong Kong

Hang Seng

27789.34

210.70

0.8

S. Korea

Kospi

2111.81

12.32

0.6

Singapore

STI

3209.58

21.47

0.7

China

Shanghai Comp

2925.72

73.59

2.6

Taiwan

TAIEX

10607.76

41.29

0.4

India

Sensex 30

39950.46

165.94

0.4

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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