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On 14 October 2019 - US steady to lower, Europe off on trade, Brexit worry; Asia up

Anne D Picker

Anne D Picker - Econoday

Uncertainty returns over near-term trade, Brexit agreements.

US markets

US equities edged down Monday in quiet trading as enthusiasm faded over Friday’s apparent progress on US-China trade. The Dow industrials, the S&P 500, and the NASDAQ all slipped 0.1 percent.

Markets noted reports that more work needs to be done before an interim US-China trade deal is concluded, and that China may not be ready to buy as much US farm goods as President Trump announced Friday. There was also widespread discussion about the lingering uncertainty over trade and its impact on the global economy as the US-European trade dispute moves more into focus.

Among sectors health care led the market, with biotech showing strength. Financials did better, with online brokers leading. Consumer discretionary shares underperformed, with restaurants and retailers down. Energy stocks declined on crude oil price weakness in response to the trade worries. Utilities lagged, along with communication services.

Among companies in the news, Boeing edged down 0.5 percent on news the aerospace giant was removing CEO Dennis Mullenberg’s responsibilities as chairman, in light of fallout from problems with the 737 Max. Meanwhile, AECOM, an engineering firm, rose 6.3 percent on news it would spin off its management services unit in response to pressure from activist investors.

In US economic news, business activity grew slightly in New York State in October, the New York Fed said in its Empire State Manufacturing Survey which was released one day early by mistake. The headline general business conditions index edged up two points to 4.0, slightly better than expectations, but still pointing to muted growth.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.42 to US$59.20, while gold rose by US$7.10 to US$1,496.10. The US dollar rose against most major currencies. US Treasuries were closed Monday for a holiday.

European markets

European equities retreated Monday as doubts returned about prospects for progress on a US-China trade deal and on a negotiated Brexit. The Europe-wide STOXX 600 fell 0.5 percent, the German DAX was off 0.2 percent, the French CAC declined 0.4 percent, and the UK FTSE-100 was off 0.5 percent.

Risk assets reacted badly to a Bloomberg report that China wants more talks before signing the phase 1 trade deal that President Trump touted on Friday. Reports that the EU is asking for more UK concessions added to worries about prospects for a last-minute Brexit deal.

Among shares in the Stoxx 600, outperformers included autos & parts, health care, real estate, and consumer staples. Underperformers included basic resources, insurance, travel, oil & gas, and banks. Among companies in the news, big pharma firms Roche (down 0.4 percent) and Novartis (down 0.8 percent) were hurt by a report that the US may impose tariffs on Swiss drugs.

In economic news, Eurozone industrial production staged a recovery August. However, while a 0.4 percent monthly rise that marginally exceeded market expectations fully reversed July's unrevised decline, annual growth still sunk from minus 2.1 percent to minus 2.8 percent, a new 2019 low.

Asia Pacific markets

Markets in Japan were on holiday Monday, while markets elsewhere posted solid gains. Although Chinese trade data published Monday showed weaker-than-expected growth in exports and imports in September, investor sentiment was supported by Friday’s positive US-China trade news, including the announcement that planned increases in US tariffs on Chinese goods will not go ahead. The Shanghai Composite index advanced 1.2 percent Monday, Hong Kong’s Hang Seng index closed up 0.8 percent, and Australia’s All Ordinaries index rose 0.5 percent.

China's trade surplus in US dollar terms widened from US$34.83 billion in August to US$39.65 billion in September, above the consensus forecast of US$34.00 billion. Exports fell 3.2 percent on the year, down from a fall of 1.0 percent previously, with weaker demand from the United States, Japan, and the European Union. Imports dropped 8.5 percent on the year after falling 5.6 percent previously.

The Monetary Authority of Singapore published its semi-annual monetary policy statement Monday, announcing that officials will target a slightly slower rate of appreciation for Singapore's nominal effective exchange rate. This represents a modest easing of monetary policy after officials twelve months ago targeted a slightly faster pace of appreciation of the currency in order to keep domestic inflation in check. Officials expect growth in the domestic economy to pick up "modestly" in 2020 but that inflation pressures should be "muted”. GDP data also published Monday showed year-on-year growth in Singapore’s economy remained very weak in the three months to September at 0.1 percent, unchanged from the pace recorded in the three months to June, broadly in line with recent PMI survey data.

Indian data published Monday showed a fall in wholesale price inflation in September but an increase in headline consumer price inflation from 3.27 percent in August to 3.99 percent, right at the mid-point of the Reserve Bank of India's target range of 2.0 percent to 6.0 percent. Weak consumer inflation in 2019 has prompted aggressive rate cuts by the Reserve Bank of India in recent months, including another cut of 25 basis points earlier this month. The increase in consumer inflation in September, however, was mainly driven by an acceleration in food prices, with price moves still relatively subdued for other categories of spending. This suggests that RBI officials may remain cautious about the inflation outlook ahead of their next policy meeting and may look at whether October inflation data, scheduled for publication mid-November, indicate price pressures are building more broadly.

Looking forward

On Tuesday in Asia/Pacific, Reserve Bank of Australia meeting minutes are due, along with Chinese CPI and PPI data. In Europe, French CPI, German ZEW, Swiss producer and import prices, and UK labor market figures are scheduled. In North America, the US Empire State manufacturing survey was released a day early on Monday. Tuesday's North American calendar includes only Redbook's weekly store sales.

Global stock markets

 

Index

14 Oct 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26787.36

-29.23

-0.1

 

NASDAQ

8048.65

-8.39

-0.1

 

S&P 500

2966.15

-4.12

-0.1

Canada

S&P/TSX Comp

*

*

*

Europe

 

 

 

 

UK

FTSE 100

7213.45

-33.63

-0.5

France

CAC

5643.08

-22.40

-0.4

Germany

XETRA DAX

12486.56

-25.09

-0.2

Italy

MIB

22097.94

-67.40

-0.3

Spain

Ibex 35

9246.5

-27.30

-0.3

Sweden

OMX Stockholm 30

1652.58

-0.70

0.0

Switzerland

SMI

9964.24

-53.15

-0.5

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6757.86

35.96

0.5

Japan

Nikkei 225

*

*

*

 

Topix

*

*

*

Hong Kong

Hang Seng

26521.85

213.41

0.8

S. Korea

Kospi

2067.4

22.79

1.1

Singapore

STI

3124.45

10.48

0.3

China

Shanghai Comp

3007.88

34.22

1.2

Taiwan

TAIEX

11066.95

176.99

1.6

India

Sensex 30

38214.47

87.39

0.2

*Markets closed

 

 

 

 

Note: all releases are listed in local time.

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