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On 15 August 2019 - Global shares: US mostly higher despite rising trade tensions; Europe lower, Asia mixed

Anne D Picker

Anne D Picker - Econoday

Sovereign bond yields continue to move lower.

US markets

New tensions between the US and China and a heavy rush of economic data made for a volatile Thursday session that ended mostly higher with the Dow up 0.4 percent, the S&P up 0.2 percent but the Nasdaq down 0.1 percent. The move into the safety of Treasuries accelerated yet further in the session as the yield on the 30-year bond moved below 2 percent.

China offered no details but warned Thursday that it will take "necessary countermeasures" if additional US tariffs go into effect as planned at the beginning of next month. A subsequent statement out of China called for the two sides to meet halfway though President Trump responded that a deal would have to be on US terms.

A report that accounting at General Electric greatly understates the company's insurance liabilities sent shares of the giant industrial manufacturer into a 10 percent slide. In other company news, Walmart rose sharply after raising guidance while JC Penney also rose sharply after posting a narrower quarterly loss.

Economic reports out of the US included a much stronger-than-expected 0.7 percent rise in July retail sales which starts consumer spending out in the third quarter where it ended the second quarter, very strong. For monetary policy , however, retail sales were eclipsed by a much sharper-than-expected 0.4 percent decline in manufacturing production (part of the industrial production report) that underscores the Federal Reserve's concern for the sector and the impact of trade tensions and slowing global growth.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude fell US$0.60 to US$58.39, while gold rose US$9.60 to US$1,533.00. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield fell 6 basis points to 2.96 percent while the yield on the 10-year note fell a sharp 8 basis points to 1.50 percent.

European markets

Rising trade tensions between the US and China sent European shares down in active trading to six-month lows. UK FTSE's posted a 1.1 percent decline Thursday with Germany's DAX down 0.7 percent and France's CAC down 0.3 percent. For the week, the FTSE's losses are at 2.6 percent with the DAX at 2.4 percent.

Trade tensions together with the recent run of soft economic data including yesterday's 0.1 percent quarterly decline in German GDP are raising recession concerns and are feeding demand for bonds. The yield on the 10-year Gilt fell 4 basis points on the day to 0.40 percent with the 10-year Bund down 6 basis points to a more deeply negative minus 0.72 percent.

In company news, United Internet sank after the German telecom services provider lowered guidance while Carlsberg shares rose after the Danish brewer posted solid results. Shares of autos were pressured in the session as were energy shares.

Economic news included a monthly 0.2 percent July rise in UK retail sales that was better than expected but still subdued and a 0.1 percent decline in the Swiss producer & import price index which was more than subdued.

Asia Pacific markets

Major Asian markets posted mixed results Thursday, with investors reacting to a wide range of factors including the inversion of the US yield curve Thursday, ongoing US-China trade tensions, further developments in Hong Kong, and better-than-expected Australian employment data. Australia’s All Ordinaries index was the worst performer in the region, dropping 2.8 percent on the day, its worst one-day fall since February 2018, with major miners and banks leading the losses.

Japanese shares also posted large falls, with the Nikkei and Topix indices down 1.2 percent and 1.0 percent respectively. The Shanghai Composite index, however, recorded a moderate 0.2percent increase, while Hong Kong’s Hang Seng index advanced 0.8 percent after the government announced a stimulus package to support the flagging domestic economy. Markets were closed for holidays in India and Korea.

With the US-China trade dispute and civil unrest weighing on economic activity and sentiment in recent months, Hong Kong’s government revised its 2019 GDP growth forecast to a range of 0.0 percent to 1.0 percent, down from a range of 2.0 percent to 3.0 percent previously. In response to this weakness, Financial Secretary Paul Chan announced Thursday an economic support package worth US$2.4 billion, mainly targeted at low-income households, smaller companies, and parts of the services sector.

Australia's labour market saw an increase of 41,100 in the number of employed persons in July, up strongly from a fall of 2,300 in June. The unemployment rate was unchanged at 5.2 percent in June, just below the consensus forecast of 5.3 percent, while the participation rate increased slightly from 66.0 percent to 66.1 percent. Stability in the unemployment and participation rates will likely reinforce the view of officials at the Reserve Bank of Australia that there remains significant spare capacity in the labour market. This assessment was a significant factor driving their decision to lower policy rates in recent meetings.

Looking forward

Singapore merchandise trade is due out in Asia with Eurozone merchandise trade scheduled in Europe. Housing starts and consumer sentiment will be posted in the US.

Global stock markets

 

Index

15 Aug 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

25579.39

99.97

0.4

 

NASDAQ

7766.62

-7.32

-0.1

 

S&P 500

2847.6

7.00

0.2

Canada

S&P/TSX Comp

16012.53

-33.41

-0.2

Europe

 

 

 

 

UK

FTSE 100

7067.01

-80.87

-1.1

France

CAC

5236.93

-14.37

-0.3

Germany

XETRA DAX

11412.67

-79.99

-0.7

Italy

MIB

*

*

*

Spain

Ibex 35

8519

-3.70

0.0

Sweden

OMX Stockholm 30

1495.71

-4.35

-0.3

Switzerland

SMI

9606.26

-22.22

-0.2

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6490.77

-186.74

-2.8

Japan

Nikkei 225

20405.65

-249.48

-1.2

 

Topix

1483.85

-15.65

-1.0

Hong Kong

Hang Seng

25495.46

193.18

0.8

S. Korea

Kospi

*

*

*

Singapore

STI

3126.09

-21.51

-0.7

China

Shanghai Comp

2815.8

6.88

0.2

Taiwan

TAIEX

10327.13

-100.60

-1.0

India

Sensex 30

*

*

*

*Markets closed

 

 

 

Note: all releases are listed in local time.

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