Skip Header

On 12 July 2019 - US up on more Fed rate cut talk; Europe flat, Asia mixed

Anne D Picker

Anne D Picker - Econoday

Pharma shares hit on worries over US intervention on drug prices.

US markets

US stocks rose Friday as bullish headlines from Federal Reserve officials continued to dominate. The Dow industrials rose 0.9 percent; the S&P gained 0.5 percent, and the NASDAQ rose 0.6 percent.

Among Fed officials making the case for more accommodative policy were New York Fed President John Williams, Chicago Fed President Charles Evans, and Fed Governor Lael Brainard, who all highlighted inflation below target and risks to the growth outlook in comments similar to those of Fed Chair Jay Powell on Wednesday and Thursday.

Health care stocks were losers Friday, with pharma hit by worries over new US government action to cut drug prices after the Trump administration pulled its health rebate plan. Pharma majors Pfizer and Merck were off 1.3 percent and 1.6 percent. Utilities and real estate also underperformed. Cyclicals, including industrials and consumer discretionary shares, outperformed on rate cut hopes.

Among shares in focus, Johnson and Johnson dropped 4.1 percent on a report the Justice Department is looking into whether company lied about cancer risks of its talcum powder. Illumina, a genome sequencing company, plunged by 16 percent on negative surprises in its quarterly earnings and guidance. US Xpress was off 11.3 percent as it cited bad economic conditions in making a gloomy earnings preannouncement. Milacron, a plastics maker, soared 24 percent on news it will be acquired by Hillenbrand, a machinery company, which fell 13 percent.

In economic news, US PPI-FD showed a 0.1 percent monthly gain, as expected. The ex-food ex-energy reading rose 0.3 percent, which is 1 tenth above expectations. Areas of weakness include energy, which fell 3.1 percent in the month and also finished goods, which dropped 0.4 percent and include a 0.8 percent decline for computers and no change for either autos or light trucks. Government purchases were also a negative at minus 0.4 percent.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was little changed at US$66.76 while gold rose US$11.13 to $1415.05. The US dollar fell against most major currencies. The yield on the US Treasury 30-year bond yield was down 1 basis point at 2.64 percent while the yield on the 10-year note was down 2 basis points at 2.11 percent.

European markets

European equities were flat to mixed Friday, with the STOXX 600 ending marginally higher. Daimler’s warning that its Q2 earnings would be below expectations was the big news, but market sentiment was bolstered by renewed expectations for central bank easing, based on the comments by Fed Chair Jay Powell and the ECB minutes.

The European STOXX 600 was up 0.01 percent, the German DAX was down 0.07 percent, the French CAC rose 0.4 percent, and the UK FTSE 100 fell 0.05 percent.

Among sectors in the Euro STOXX 600, chemicals and construction shares outperformed, while health care and food and beverages underperformed.

Daimler was off 1.2 percent after issuing a profits warning for the second quarter, its second in the last month, due to diesel emissions regulation, and vehicle recalls. UK big pharma firms AstraZeneca and GlaxoSmithKline fell after the Trump administration withdrew a plan to cut drug prices.

Among other companies in focus, travel company Thomas Cook, plunged by 59 percent after confirming it is in talks for a bailout by banks and China’s Fosun. SEB, the Swedish bank, rose 1.2 percent, while Elisa, a Finnish telecom, rose 5.2 percent, both on positive earnings.

In economic news, Eurozone industrial production rebounded more sharply than expected in May. Following a slightly smaller revised 0.4 percent monthly fall in April, output (ex-construction) rose 0.9 percent, its first increase since January. Even so, annual workday adjusted growth still slipped from minus 0.4 percent to minus 0.5 percent.

Asia Pacific Markets

Major Asian markets were mixed on the day Friday but generally finished the week lower. The Shanghai Composite index closed up 0.4 percent on the day but was the worst performer in the region, down 2.7 percent, while Hong Kong’s Hang Seng index finished up 0.1 percent on the day and down 1.1 percent on the week. Japanese shares were little changed on Friday but closed lower on the week, with the Nikkei index up 0.2 percent on the day and down 0.3 percent on the week and the Topix index down 0.1 percent on the day and down 1.0 percent on the week. Australia’s All Ordinaries index lost ground both on the day and the week, down 0.3 percent and 0.7 percent respectively.

Chinese trade data for June was the main focus of the regional data calendar Friday. China's trade surplus in US dollar terms widened from US$41.65 billion in May to US$50.98 billion in June, larger than the consensus forecast of US$43.2 billion. Exports fell 1.3 percent on the year in June after advancing 1.1 percent in May, while year-on-year growth in imports picked up from a fall of 8.5 percent to a decline of 7.3 percent. The fall in headline exports growth was mainly driven by the United States and the European Union, partly offset by stronger exports to Japan. Also published today, bank lending data showed new lending amounted to CNY1.66 trillion in June, up from CNY1.18 trillion in May.

Indian data published Friday showed a small increase in headline inflation but weaker growth in industrial production. Inflation rose for a fifth consecutive month from 3.05 percent in May to 3.18 percent in June, still still well below the mid-point of the Reserve Bank of India's target range of 2.0 percent to 6.0 percent. This was largely driven by food and beverage prices, which rose 2.37 percent on the year in June after increasing 2.03 percent in May. Industrial production index rose 3.1 percent on the year in May, moderating from growth of 3.4 percent in April. Manufacturing output, which accounts for almost 78 percent of the total index, rose 2.5 percent on the year in May after advancing 2.8 percent in April.

Singapore's gross domestic product expanded 3.4 percent quarter-on-quarter in the three months to June (seasonally adjusted and annualized), down sharply from an increase of 3.8 percent in the three months to March. Year-on-year growth in Singapore's GDP also slowed from a revised 1.1 percent in the three months to March to 0.1 percent in the three months to June. The drop in year-on-year growth in the three months to June was mainly driven by weaker manufacturing output, down 3.8 percent on the year after falling 0.4 percent in the three months to March. This is broadly in line with monthly data showing weakness in industrial production and exports over this period.

Looking forward

Central Bank activities

 

Jul-16

Australia

RBA Meeting Minutes

Jul-17

US

Beige Book

The following indicators will be released this week...

Europe

 

 

Jul-15

Switzerland

Producer and Import Price Index (June)

Jul-16

Germany

ZEW Survey (July)

 

Italy

CPI (June)

 

UK

Labor Market Report (June)

Jul-17

Eurozone

HICP (June)

 

UK

CPI (June)

 

 

PPI (June)

Jul-18

Switzerland

Merchandise Trade (June)

 

UK

Retail Sales (June)

Jul-19

Eurozone

GDP Flash (June)

 

Germany

PPI (June)

 

UK

Public Sector Finances (June)

Asia Pacific

 

 

Jul-15

China

Fixed Asset Investment (June)

 

 

GDP (Q2)

 

 

House Price Index (June)

 

 

Industrial Production (June)

 

 

Retail Sales (June)

 

India

WPI (June)

Jul-18

Australia

Labor Force Survey (June)

 

Japan

Merchandise Trade (June)

Jul-19

Japan

CPI (June)

Americas

 

 

Jul-15

US

Empire State Mfg Survey (July)

Jul-16

US

Business Inventories (May)

 

 

Housing Market Index (July)

 

 

Import and Export Prices (June)

 

 

Industrial Production (June)

 

 

Retail Sales (June)

 

 

Treasury International Capital (May)

Jul-17

Canada

CPI (June)

 

 

Manufacturing Sales (May)

 

US

Housing Starts (June)

Jul-18

US

Jobless Claims (Week of July 13)

 

 

Leading Indicators (June)

 

 

Philadelphia Fed Survey (July)

Jul-19

Canada

Retail Sales (May)

 

US

Consumer Sentiment (July p)

Global Stock Markets

 

Index

12 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27332.03

243.95

0.9

 

NASDAQ

8244.15

48.11

0.6

 

S&P 500

3013.77

13.86

0.5

Canada

S&P/TSX Comp

16488.12

-39.78

-0.2

Europe

 

 

 

 

UK

FTSE 100

7505.97

-3.85

-0.1

France

CAC

5572.86

20.91

0.4

Germany

XETRA DAX

12323.32

-8.80

-0.1

Italy

MIB

22182.7

13.28

0.1

Spain

Ibex 35

9293.2

12.90

0.1

Sweden

OMX Stockholm 30

1625.62

12.41

0.8

Switzerland

SMI

9762.98

-116.55

-1.2

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6788.81

-17.02

-0.3

Japan

Nikkei 225

21685.9

42.37

0.2

 

Topix

1576.31

-2.32

-0.1

Hong Kong

Hang Seng

28471.62

39.82

0.1

S. Korea

Kospi

2086.66

6.08

0.3

Singapore

STI

3357.34

6.89

0.2

China

Shanghai Comp

2930.55

12.79

0.4

Taiwan

TAIEX

10824.35

-19.07

-0.2

India

Sensex 30

38736.23

-86.88

-0.2

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

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.