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On 11 July 2019 - US gains on rate cut hopes; Europe off, Asia better

Anne D Picker

Anne D Picker - Econoday

Second day of Powell comments lifts sentiment again.

US markets

US stocks were mostly higher for a second consecutive day Thursday amid renewed expectations for Fed rate cuts after more comments from Fed Chair Jay Powell. The Dow industrials rose 0.9 percent; the S&P rose 0.2 percent, though the NASDAQ eased 0.08 percent.

Powell said the Federal Reserve's shift to a rate-cut bias in June helped to reverse what he described as a "confidence shock" in May, a month marked by US tariff tensions with China and also briefly with Mexico. Powell's two days of testimony have increased expectations that the Fed, aiming to limit the risks from manufacturing and global slowing, will cut rates at their month-end policy meeting, underscored by Powell's comment today that "many" on the FOMC think easing would be appropriate.

Among shares in focus, Delta Airlines rose 1 percent after raising its earnings guidance. Pharmacy benefits managers rallied on news the Trump administration would withdraw its plan to cut rebates from government drug plans. CVS rose 4.5 percent, and Cigna rose 8.9 percent. Bed Bath & Beyojnd dropped 3.3 percent on an earnings miss.

In economic news, a 1.1 percent monthly surge in apparel fed a 0.3 percent rise in the US CPI core rate. Year-on-year the core is up 1 tenth to 2.1 percent. Reflecting lower energy prices, the overall CPI managed only a 0.1 percent gain on the month for a 1.6 percent yearly rate. Separately, new US jobless claims for the July 6 week came in below expectations, down a sizable 13,000 to 209,000. The drop pulls down the 4-week average by 3,250 to a 219,250 level that, in contrast to the headline weekly change, is still in line with levels at mid-June.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was down 27 cents to US$66.74 while gold rallied US$28.75 to $1,407.00. The US dollar fell against most major currencies. The yield on the US Treasury 30-year bond yield was up 7 basis points at 2.65 percent while the yield on the 10-year note was also up 7 basis points at 2.13 percent.

European markets

European equities ended mostly weaker Thursday, though Italian markets rose as strong demand for Italian government debt pushed down borrowing costs.

The European STOXX 600 was down 0.1 percent, the German DAX lost 0.3 percent, the French CAC fell 0.3 percent, and the UK FTSE 100 likewise eased by 0.3 percent. The Italian FTSE MIB rose 0.6 percent.

Among sectors, banks and oil and gas outperformed, while health care and basic resources underperformed.

Among companies in focus, Hurricane Energy surged by 21 percent on news of a big rise in oil production. German packaging company Gerresheimer rose 14 percent on an earnings beat. On the downside, Norwegian Air dropped 13 percent on news its CEO was stepping down.

In economic news, in German CPI there were no revisions to the provisional data in the final CPI report for June. Prices rose 0.3 percent on the month, lifting the annual inflation rate by 0.2 percentage points versus its final May reading to 1.6 percent, the second strongest outturn so far in 2019. However, the soft flash HICP was revised 0.2 percentage points stronger and now also shows a 0.3 percent monthly increase and a 1.5 percent yearly rate. In French CPI data, the provisional results were unrevised in the final report for June. A 0.2 percent monthly rise in prices put the annual inflation rate at 1.2 percent, in line with its earlier estimate and 0.3 percentage points higher than its final reading in May. The final HICP showed a 0.3 percent monthly increase and a 1.4 percent yearly rate, both rates unrevised from their flash outturns.

Asia Pacific Markets

Most major Asian markets posted moderate gains Thursday, following the lead set overnight by US stocks after comments from the Fed's Powell boosted expectations for a rate cut later this month. Japan’s Nikkei and Topix indices both closed up 0.5 percent, with Australia’s All Ordinaries index advancing 0.4 percent. Hong Kong’s Hang Seng index was among the stronger regional performers, up 0.8 percent, but the Shanghai Composite index was the weakest, up just 0.1 percent.

Australian home loans data showed further weakness in May, with national elections held mid-month likely contributing to subdued demand for housing finance. The number of dwelling commitments for owner occupied housing in Australia was flat on the month (seasonally adjusted) after dropping a revised 0.9 percent in April, while the value of home loans (excluding refinancing) fell 2.4 percent on the month after dropping 0.8 percent previously. Officials at the Reserve Bank of Australia at their policy meeting earlier this month noted that conditions in most domestic housing markets remained "soft" but also pointed to signs that prices are stabilising in the two largest cities, Sydney and Melbourne.

Japan's Index of Tertiary Industry Activity (seasonally adjusted) fell 0.2 percent on the month in May after advancing 0.8 percent on the month in April. Activity fell 0.3 percent on the month for industries providing services to consumers and was unchanged for industries providing services to businesses. Weaker growth in the Tertiary Index in May is in line with the Markit Services PMI survey which indicated that activity in the services sector slowed that month. This survey showed a small increase in its headline index in June.

Looking forward

In Asia-Pacific data Friday, Singapore GDP, Indian CPI and industrial production data, and Chinese merchandise trade reports are due. In Europe, it’s Eurozone industrial production, and in the US, the PPI-final demand report will be released.

Global Stock Markets

 

Index

11 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27088.08

227.88

0.8

 

NASDAQ

8196.04

-6.49

-0.1

 

S&P 500

2999.91

6.84

0.2

Canada

S&P/TSX Comp

16527.9

-35.39

-0.2

Europe

 

 

 

 

UK

FTSE 100

7509.82

-20.87

-0.3

France

CAC

5551.95

-15.64

-0.3

Germany

XETRA DAX

12332.12

-41.29

-0.3

Italy

MIB

22169.42

124.46

0.6

Spain

Ibex 35

9280.3

27.40

0.3

Sweden

OMX Stockholm 30

1613.21

-9.24

-0.6

Switzerland

SMI

9879.53

-58.03

-0.6

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6805.83

28.15

0.4

Japan

Nikkei 225

21643.53

110.05

0.5

 

Topix

1578.63

7.31

0.5

Hong Kong

Hang Seng

28431.8

227.11

0.8

S. Korea

Kospi

2080.58

21.80

1.1

Singapore

STI

3350.45

10.03

0.3

China

Shanghai Comp

2917.76

2.46

0.1

Taiwan

TAIEX

10843.42

44.94

0.4

India

Sensex 30

38823.11

266.07

0.7

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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