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On 09 August 2019 - Global shares: US, Europe off on US-China worries, Asia mixed

Anne D Picker

Anne D Picker - Econoday

US markets

Major US stock indexes weakened Friday but ended up from the day’s worst levels amid US-China worries after President Trump said he is not ready to make a trade deal with China, and that trade talks may not go forward in September. The Dow industrials eased 0.3 percent, the S&P 500 fell 0.7 percent, and the NASDAQ fell 1.0 percent. 

Risk appetite was also hurt by the latest Chinese yuan fixing, well above 7 per dollar, which renewed worries about a rapid depreciation in the Chinese currency. Mixed statements from the White House on prospects for allowing US firms to do business with Huawei added the disquiet over the US-China dispute.

Most sectors in the S&P 500 were lower. Weakest were oil services, semiconductors, the FAANGs, apparel, auto suppliers, machinery, trucking. Doing relatively better were restaurants, hospitals, hotel/leisure, exchanges, and pharma. 

Among companies in focus, ride-share leader Uber dropped 6.8 percent after a big revenue miss. Software company Activision Blizzard was off 2.6 percent on an earnings miss. Business IT firm DXC Technology plunged 30 percent after cutting its guidance and on analyst downgrades.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude rose 96 cents to US$58.34, while gold fell US$5.00 to US$1509.80. The US dollar rose against the British pound, the Australian dollar and the yuan but weakened against most other major currencies. The yield on the US Treasury 30-year bond yield was up one basis point at 2.25 percent while the yield on the 10-year note was up one basis point at 1.73 percent. 

In economic news, rising energy prices held up US producer prices in July, which otherwise were very soft. The PPI-FD edged an as-expected 0.2 percent higher in July though prices excluding food & energy and prices excluding food, energy & trade services both fell 0.1 percent. Year-on-year rates held steady at 1.7 percent at the headline level but eased back for the two core readings, to 2.1 percent for ex-food ex-energy and to 1.7 percent when also excluding trade services. Meanwhile, Canadian employment unexpectedly declined for the second month in a row in July, shedding 24,200 jobs and falling far short of the consensus forecast calling for a modest increase. The jobless rate rose to 5. 7 percent, up 0.2 percentage points from June and 0.3 percentage points from the record low set in May.  Canadian housing starts were firmer than expected in July, at a seasonally adjusted annualized rate of 222,013 down 11 percent from June's revised 245,455 outturn and the third strongest pace of the year.

European markets

European equities fell Friday as US-China worries depressed risk appetite, and Italian political turmoil added to the gloom. The Europe-wide STOXX 600 fell 0.9 percent and the German DAX dropped 1.3 percent, the French CAC fell 1.1 percent, and the UK FTSE 100 fell 0.4 percent.  

The Italian FTSE MIB dropped by 2.5 percent and Italian yield spreads widened on news that Deputy Prime Minister Matteo Salvini called for elections and submitted a motion of no confidence in the government. Banks were among the worst performers on the Italy news, and trade-sensitive sectors such as basic materials and autos were hit by the China worries.

Attention focused on US-China tensions after a report the White House is holding off on granting waivers to firms wishing to do business with Huawei. News that China fixed the yuan well above 7 per dollar added to talk of a currency war on top of the trade war.

In the Euro Stoxx 600, outperformers included health care, food and beverage, and real estate, while underperformers were basic resources, auto and parts, telecom, chemicals, and banks. In corporate news, German pharma and chemicals firm Bayer rallied 4.4 percent on a report it was proposing to settle its exposure to US lawsuits over its Roundup herbicide.

In economic news, UK monthly GDP showed total output was flat in June following a downward revised 0.2 percent gain in May and a downward revised 0.5 percent decline in April. Quarterly growth came in negative at minus 0.2 percent following a 0.3 percent growth rate in March-May and 0.4 percent in February-April. Meanwhile, French goods producing industries had a surprisingly poor June. Output (excluding construction) fell sharply by 2.3 percent, wiping out the downward revised 2.0 percent gain in May and coming in even weaker than a strongly negative consensus forecast. Annual growth vanished to 0.0 percent after rising to 4.0 percent last time.

Asia Pacific markets

Major Asian markets posted mixed results Friday but all ended the week well down, with global trade tensions and policy uncertainty likely to remain key factors driving near-term moves. The Shanghai Composite index and Hong Kong’s Hang Seng index both closed down 0.7 percent Friday, extending their losses on the week to 3.6 percent and 3.2 percent respectively, while authorities set the yuan reference rate above the key level of 7 against the dollar for the second time this week. Chinese inflation data published Friday showed slightly stronger consumer price pressures, with headline inflation CPI increasing from 2.7 percent in June to 2.8 percent in July, mainly reflecting a bigger rise in food prices. Producer prices, however, weakened, with PPI inflation falling from no change in June to a drop of 0.3 percent in July.

Japanese shares rose moderately on the day after better-than-expected GDP data, with the Nikkei and Topix indices closing up 0.4 percent and 0.3 percent respectively and both losing 1.9 percent on the week. Japan’s economy grew 0.4 percent on the quarter in the three months to June, down from revised growth of 0.7 percent in the three months to March but above the consensus forecast for an increase of 0.2 percent. Although headline GDP growth fell due to weaker net exports, domestic demand picked up in the three months to June, up 0.7 percent on the quarter compared with growth of 0.3 percent previously, with stronger growth in household consumption, private non-residential investment and public spending. 

Australia’s All Ordinaries index also posted a modest rise Friday, closing up 0.3 percent on the day and finishing down 2.7 percent on the week. The Reserve Bank of Australia published its quarterly Statement on Monetary Policy Friday, with growth forecasts little changed but officials now expecting a slower increase in price pressures, with headline inflation now forecast to stay below their target range of 2.0 percent to 3.0 percent throughout 2019 and 2020. Echoing comments made at the RBA’s policy meeting earlier in the week, the statement noted that rates are likely to stay low for an “extended period” with the bias appearing to remain in favour of further policy easing.

Looking forward

The following indicators will be released this week...

Europe

 

 

Aug-13

Germany

CPI (July)

 

 

ZEW (August)

 

UK

Labor Market Report (July)

Aug-14

Eurozone

GDP Flash (Q2)

 

 

Industrial Production (June)

 

France

CPI (July Final)

 

 

ILO Unemployment (Q2)

 

Germany

GDP Flash (Q2)

 

UK

CPI (July)

 

 

PPI (July)

Aug-15

Switzerland

Producer and Import Price Index (July)

 

UK

Retail Sales (July)

Asia Pacific

 

 

Aug-12

India

CPI (July)

 

 

Industrial Production (June)

Aug-13

Japan

PPI (June)

Aug-14

China

Fixed Asset Investment (July)

 

 

Industrial Production (July)

 

 

Retail Sales (July)

 

India

WPI (July)

 

Japan

Machine Orders (June)

Aug-15

Australia

Labor Force Survey (July)

 

China

House Price Index (July)

Aug-16

Singapore

Merchandise Trade (July)

Americas

 

 

Aug-12

US

US Treasury Budget (July)

Aug-13

US

CPI (July)

Aug-14

US

Import and Export Prices (July)

Aug-15

US

Industrial Production (July)

 

 

Philadelphia Fed Survey (August)

 

 

Productivity and Costs (Q2)

 

 

Consumer Sentiment (August)

Aug-16

US

Housing Starts (July)

Global Stock Markets

 

Index

9 Aug 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26287.44

-90.75

-0.3

 

NASDAQ

7959.14

-80.02

-1.0

 

S&P 500

2918.65

-19.44

-0.7

Canada

S&P/TSX Comp

16341.34

-63.19

-0.4

 

 

 

 

 

Europe

 

 

 

 

UK

FTSE 100

7253.85

-32.05

-0.4

France

CAC

5327.92

-60.04

-1.1

Germany

XETRA DAX

11693.8

-151.61

-1.3

Italy

MIB

20324.23

-516.92

-2.5

Spain

Ibex 35

8757.8

-111.20

-1.3

Sweden

OMX Stockholm 30

1531.52

-19.10

-1.2

Switzerland

SMI

9749.92

-1.63

0.0

 

 

 

 

 

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6663.43

21.17

0.3

Japan

Nikkei 225

20684.82

91.47

0.4

 

Topix

1503.84

5.18

0.3

Hong Kong

Hang Seng

25939.3

-181.47

-0.7

S. Korea

Kospi

1937.75

17.14

0.9

Singapore

STI

3168.94

0.00

0.0

China

Shanghai Comp

2774.75

-19.80

-0.7

Taiwan

TAIEX

10494.49

0.00

0.0

India

Sensex 30

37581.91

254.55

0.7

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.