Skip Header

On 13 August 2019 - Global shares: US, Europe gain as US delays tariffs; Asia off on Hong Kong worries

Anne D Picker

Anne D Picker - Econoday

Risk-on move as US delays tariffs on certain Chinese goods.

US markets

Major US stock indexes rallied Tuesday on news the US is delaying imposition of a new round of tariffs on certain Chinese goods, and that high-level bilateral trade talks had resumed. The Dow industrials rose 1.4 percent, the S&P 500 rose 1.5 percent, and the NASDAQ led the way, up 1.9 percent.

The trade headlines offset news that Hong Kong’s airport remained shut Tuesday, gloomy German ZEW data which added to global recession worries, and an unexpected uptick in US CPI, though expectations for Fed rate cuts remained intact.

Tech shares and FAANG shares led the way higher as traders put on risk with Apple (up 4.3 percent) and semiconductors notable winners. Cell phones and electronics were among the items subject to the delay in the tariffs.

Among companies in focus, CBS (up 1.5 percent) and Viacom (down 5.5 percent) reacted after Reuters reported the two firms had agreed on terms for a merger. Advance Auto Parts fell 0.1 percent after an earnings miss and lowering its guidance. General Electric rose 3.4 percent after it disclosed its CEO bought $3 million of the company's stock.

In economic news, emerging pressure in medical costs and steady pressure in housing gave a fundamental lift to consumer prices, which in July rose 0.3 percent for both the headline and the core. Both of these results were 1 tenth above expectations, as were the respective year-on-year rates, at 1.8 and 2.2 percent. Three-tenth gains for the monthly core are rare and a back-to-back 0.3 percent gain is even more rare with June and July this year showing the most two months of core pressure since 2005. July's results narrow the rate-cut room for the Federal Reserve.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude rose US$2.76 cents to US$61.25, while gold fell US$8.80 to US$1,515.20. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield was up 1 basis point at 2.15 percent while the yield on the 10-year note rose 5 basis points to 1.69 percent.

European markets

European equities rebounded to end higher Tuesday on news suggesting the US is offering China an olive branch in the trade war. Markets had weakened earlier on bearish German economic data. The Europe-wide STOXX 600 rose 0.5 percent and the German DAX was up 0.6 percent, the French CAC rose 1.0 percent, and the UK FTSE 100 gained 0.3 percent.

The US Trade Representative said it would delay imposing 10 percent tariffs on roughly $300 billion in Chinese goods from Sept. 1 until Dec. 15 for certain items. The Trump administration also said bilateral telephone talks between senior trade officials would resume.

Risk assets bounced up in the European afternoon, with basic resources, and autos and parts among the leaders. Autos were down sharply earlier in the day, in particular after an unexpected drop in the ZEW economic sentiment indicator. Among mining shares, Anglo American was up 2.6 percent. Underperformers included retail, real estate, and travel and leisure.

In economic news, analysts are growing much more pessimistic about the state of the German economy in August and ZEW's survey results were considerably softer than market consensus. The current conditions gauge dropped 12.4 points to minus 13.5, its tenth fall in the last eleven months and the lowest reading since June 2010. At the same time, expectations plunged 19.6 points to minus 44.1, their third straight fall and their worst outturn since December 2011. Their long-run average is up at 21.6. ZEW said August's poor survey findings reflect a significant deterioration in the outlook for the German economy, as escalation of the US trade dispute with China, the risk of competitive devaluations and the increased likelihood of a no-deal Brexit put additional pressure on economic growth and further strain on the development of German exports and industrial production.

Asia Pacific markets

Major Asian markets closed lower Tuesday, with weaker US shares and concerns about ongoing civil unrest in Hong Kong weighing on investor sentiment across the region. Protests disrupted the operation of Hong Kong’s international airport for a second consecutive day. Hong Kong’s Hang Seng index fell sharply, down 2.1 percent on the day, with local airline Cathay Pacific again among the weaker performers after Chinese aviation authorities directed it to ban from flights to mainland China any staff who had participated in protests. Japan’s Nikkei and Topix indices closed down 1.1 percent and 1.2 percent reactively as trading resumed after Monday’s holiday. The Shanghai Composite index fell 0.6 percent on the day while Australia’s All ordinaries index fell 0.3 percent.

Revised Singapore GDP data were the main focus of the regional data calendar Tuesday. Estimates for growth in the three months to June were little changed from initial estimates, with the economy contracting by 3.3 percent on the quarter, mainly driven by weakness in the manufacturing sector. Officials at the Monetary Authority of Singapore. however, now have significantly weaker expectations about the near-term growth outlook, downgrading their forecasts for GDP growth in 2019 from a range of 1.5 percent to 2.5 percent to a new range of 0.0 percent to 1.0 percent. Also published Tuesday, Japanese data showed weaker producer price inflation in July and steady conditions in the services sector in June.

Indian data showed a small fall in headline inflation from 3.18 percent in June to 3.15 percent in July, still well below the mid-point of the Reserve Bank of India's target range of 2.0 percent to 6.0 percent. A fall in fuel and light charges was the main factor driving this decline. The RBI has cut policy rates aggressively in recent months, and Tuesday's data suggest that the bias of officials will remain in favour of further rate cuts in coming months.

Looking forward

On Wednesday in Asia/Pacific: Chinese fixed asset investment, Chinese industrial production, and Chinese retail sales reports are due, plus Indian merchandise trade, Indian WPI, and Japanese machine orders. In Europe: Eurozone GDP flash, Eurozone industrial production, French CPI, French ILO unemployment rate, German GDP flash, UK CPI and UK PPI. In North America, US import & export prices and EIA Petroleum Status data will be released.

Global stock markets

 

Index

13 Aug 2014

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26279.91

372.54

1.4

 

NASDAQ

8016.36

152.95

1.9

 

S&P 500

2926.32

42.57

1.5

Canada

S&P/TSX Comp

16350.84

113.07

0.7

Europe

 

 

 

 

UK

FTSE 100

7250.9

24.18

0.3

France

CAC

5363.07

52.76

1.0

Germany

XETRA DAX

11750.13

70.45

0.6

Italy

MIB

20539.43

275.60

1.4

Spain

Ibex 35

8695.1

18.70

0.2

Sweden

OMX Stockholm 30

1538.53

5.47

0.4

Switzerland

SMI

9786.24

26.22

0.3

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6648.09

-22.05

-0.3

Japan

Nikkei 225

20455.44

-229.38

-1.1

 

Topix

1486.57

-17.27

-1.1

Hong Kong

Hang Seng

25281.3

-543.42

-2.1

S. Korea

Kospi

1925.83

-16.46

-0.9

Singapore

STI

3146.73

-22.21

-0.7

China

Shanghai Comp

2797.26

-17.73

-0.6

Taiwan

TAIEX

10362.66

-109.70

-1.1

India

Sensex 30

36958.16

-623.75

-1.7

*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.