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On 13 September 2019 - US mixed, Europe, Asia up on US-China trade hopes

Anne D Picker

Anne D Picker - Econoday

Apple selloff limits US gains; caution sets in before Fed policy meeting next week.

US markets

US equities were mixed Friday, with support from hopeful news on US-China trade talks, but weakness in Apple Inc. depressed the major stock indexes, and trading turned cautious ahead of next week’s Federal Reserve policy announcement. The Dow industrials rose 0.1 percent, the S&P 500 edged down 0.1 percent, and the NASDAQ eased by 0.2 percent. Apple fell 1.9 percent after Goldman Sachs cut its price target for the tech company’s shares.

More conciliatory gestures from the US and China on trade -- including Chinese tariff exemptions for certain US farm goods -- plus a moderately strong US retail sales report, supported risk appetite, and hit US Treasuries hard. The more positive fundamentals appeared to diminish prospects for the Fed to follow up the expected 25 basis point rate cut next week with more rate cuts later in the year. Selling in US Treasuries accelerated after 10-year notes broke below support at a yield of 1.79 percent to trade around 1.90 percent late Friday.

Markets took note of reports that global macro hedge funds have piled into short US Treasuries/long equities positions this week and are hunting for stop-loss orders to force long Treasuries positions out. Meanwhile, many long/short funds rotated into cyclical stocks this week, especially technology and banks, while shorting telecom and other defensive sectors.

The more hopeful mood on US-China trade Friday helped materials, energy, and industrial stock sectors outperform. On the downside, consumer discretionary shares, telecom, and consumer staples were laggards. Among companies in focus, Broadcom, the semiconductor and software maker, was off 3.4 percent after an earnings miss, and saying its chip business would remain depressed. Tyson Foods, the meat company, rose 2.4 percent on news of Chinese tariff exemptions for some US meat.

In US economic data, strong auto sales lifted retail sales in August, which rose 0.4 percent but were unchanged excluding autos. Sales excluding autos and gas (where sales fell sharply on a drop in pump prices) managed only a 0.1 percent rise. But for another important core reading, which is the control group that besides autos and gas also excludes food services and building materials, sales rose a respectable 0.3 percent in the month. Autos led the components with a 1.8 percent August gain that lifts this year-on-year rate to very strong 6.8 percent sales growth. Separately, consumer sentiment rebounded moderately in the September preliminary report to 92.0, up 2.2 points on the month, but still 8 points below the recent high in May.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 4 cents to US$60.28, while gold fell by US$11.80 to US$1,494.90. The US dollar fell against most major currencies but rose versus the Canadian dollar. The US Treasury 30-year bond yield jumped 12 basis points to 2.37 percent while the 10-year note yield rose 12 basis points to 1.90 percent.

European markets

European equities firmed and fixed income markets retreated on Friday, continuing their recent trend, on continued positive US-China trade news, and suggestions of progress in UK-EU talks toward a Brexit deal. The Europe-wide STOXX 600 rose 0.4 percent, the German DAX gained 0.5 percent, and the French CAC edged up 0.2 percent. The UK FTSE-100 was up 0.3 percent.

Sentiment on Brexit improved as UK Prime Minister Boris Johnson appeared to edge closer to a Brexit deal, though prospects remained unclear. On the positive side were reports the Irish Democratic Unionist Party, part of the Conservative coalition, might allow more flexibility to facilitate compromise on the vexed Irish backstop issue.

Meanwhile, markets continued to react to Thursday’s ECB announcement, and banks outperformed, as aspects of the ECB package appear supportive for the sector. These include a smaller-than-expected interest rate cut, expanding the range of bank holdings eligible for ECB refinancing, and “tiering,” to allow exemption from negative rates for some bank deposits.

Among shares in the Stoxx 600, outperformers, in addition to banks, included basic resources, financial services, and autos & parts, while underperformers included defensive shares -- food & beverages, utilities, and personal & household goods. Spanish banks were among the top performers, with Caixa Bank up 7.3 percent, and Banco de Sabadell up 7.8 percent.

In corporate news, the board of the London Stock Exchange (up 3.6 percent) rejected a takeover offer from the Hong Kong Exchange and said it would proceed with its own purchase of Refinitiv, a financial data and information service. Meanwhile, Swiss pharma company Roche Holding rose 1.6 percent on good news in a clinical drug trial.

Asia Pacific markets

Markets in China and Korea were closed for holidays Friday but markets elsewhere in the region closed higher, extending gains made earlier in the week. Investor sentiment was supported by the ECB’s rate cut Thursday as well signs of improvement in US-China trade tensions. Speaking late Thursday, President Trump indicated that he might consider an “interim" trade deal with China, though officials stressed that the administration prefers a more complete agreement. The regional data calendar was light Friday and provided no major news to guide sentiment.

Japanese markets posted strong gains Friday and were the clear regional outperformers on the week, with the Nikkei and Topix indices up 1.1 percent and 0.9 percent respectively on the day and up 3.7 percent and 4.7 percent respectively on the week. Hong Kong’s Hang Seng index also rose 1.0 percent on the day to extend its weekly gain to 2.5 percent, with concessions made to protesters last week by the government appearing to reassure investors. Australia’s All Ordinaries index was the underperformer for the region, increasing just 0.2 percent on the day and 0,4 percent on the week. With trading closed for the day, the Shanghai Composite index gained 1.1 percent on the week.

Looking forward

Central Bank activities

Sep-17

Australia

RBA Meeting Minutes

Sep-18

US

FOMC Announcement, Forecasts, and Fed Chair Press Conference

Sep-19

Japan

BOJ Policy Announcement

 

Switzerland

SNB Policy Assessment

 

UK

BOE Policy Announcement and Minutes

The following indicators will be released this week...

Europe

Sep-16

Italy

CPI (August)

Sep-17

Germany

ZEW Survey (September)

Sep-18

Eurozone

HICP (August)

 

UK

CPI (August)

 

 

PPI (August)

Sep-19

Switzerland

Merchandise Trade (August)

Sep-20

Eurozone

EC Consumer Confidence Flash (September)

 

UK

Public Sector Finances (August)

 

 

Retail Sales (August)

Asia Pacific

Sep-16

China

Fixed Asset Investment (August)

 

 

Industrial Production (August)

 

 

Retail Sales (August)

 

India

WPI (August)

Sep-17

Australia

Residential Property Prices (Q2)

 

China

House Price Index (August)

 

Singapore

Merchandise Trade (August)

Sep-18

Japan

Merchandise Trade (August)

Sep-19

Australia

Labor Fprce Survey (August)

 

New Zealand

GDP (Q2)

Sep-20

Japan

CPI (August)

Americas

Sep-16

US

Empire State Manufacturing Survey (September)

Sep-17

Canada

Manufacturing Sales (July)

 

US

Housing Market Index (September)

 

 

Industrial Production (August)

 

 

Treasury International Capital (July)

Sep-18

Canada

CPI (August)

 

US

Housing Starts (August)

Sep-19

US

Existing Home Sales (August)

 

 

Jobless Claims (Week of Sept. 14)

 

 

Philadelphia Fed Survey (September)

Sep-20

Canada

Retail Sales (July)

Global stock markets

 

Index

13 Sep 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27219.52

37.07

0.1

 

NASDAQ

8176.72

-17.75

-0.2

 

S&P 500

3007.39

-2.18

-0.1

Canada

S&P/TSX Comp

16682.42

39.14

0.2

Europe

 

 

 

 

UK

FTSE 100

7367.46

22.79

0.3

France

CAC

5655.46

12.60

0.2

Germany

XETRA DAX

12468.53

58.28

0.5

Italy

MIB

22181.41

98.24

0.4

Spain

Ibex 35

9137.9

55.60

0.6

Sweden

OMX Stockholm 30

1665.35

13.90

0.8

Switzerland

SMI

10047.34

-46.75

-0.5

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6777.15

11.49

0.2

Japan

Nikkei 225

21988.29

228.68

1.0

 

Topix

1609.87

14.77

0.9

Hong Kong

Hang Seng

27352.69

265.06

1.0

S. Korea

Kospi

*

*

*

Singapore

STI

3211.49

16.53

0.5

China

Shanghai Comp

*

*

*

Taiwan

TAIEX

*

*

*

India

Sensex 30

37384.99

280.71

0.8

*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.