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On 15 October 2019 - US up on earnings; Europe gains on Brexit hopes; Asia mixed

Anne D Picker

Anne D Picker - Econoday

Upbeat bank, pharma results lift US markets.

US markets

US equities rose Tuesday on supportive earnings and improved sentiment on the US-China trade outlook. The Dow industrials rose 0.9 percent, the S&P 500 gained 1.0 percent, and the NASDAQ was up 1.2 percent.

News suggesting progress toward an orderly Brexit deal added to the better risk mood, but the major impetus was upbeat earnings from big banks and big pharma. Among sectors, banks, communications services, and health care led the gains, while defensive stocks, including utilities and real estate, were the only losers.

Among companies in the news, JP Morgan Chase rallied 3.0 percent on an earnings beat, led by net interest income, while Citigroup rose 1.4 percent on an earnings beat, and after it reaffirmed its hefty dividend plans.

Health care icon Johnson & Johnson rose 1.6 percent on an earnings beat powered by strong drug sales. United Healthcare, the insurance company, rose 8.1 percent after reporting positive results, led by its drug benefit plans.

In US economic news, St. Louis Fed President James Bullard said he hoped the Fed has already taken out enough insurance with its two rate cuts to keep the economic recovery going. "We can take back that insurance during 2020 or 2021 if it turns out we were overly worried about downside risk," he said.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 35 cents to US$58.85, while gold fell by US$11.70 to US$1,484.40. The US dollar fell against most major currencies. The US Treasury 30-year bond yield rose 4 basis points to 2.34 percent while the 10-year note yield rose 4 basis points to 1.78 percent.

European markets

European equities advanced Tuesday on news suggesting movement toward a negotiated Brexit. The Europe-wide STOXX 600 rose 1.1 percent, the German DAX gained 1.2 percent, and the French CAC rose 1.0 percent. The export-heavy UK FTSE-100 eased by 0.03 percent, as sterling rose on the Brexit news, while the domestic-focused UK FTSE-250 gained 1.3 percent. Markets reacted to reports that UK and EU are nearing a Brexit deal. Other reports said an emergency Brexit EU summit is likely before Oct. 31 to address the Irish backstop issue, if the parties don’t reach agreement by Tuesday night.

Among shares in the Stoxx 600, outperformers included telecom, autos & parts, media, and banks. Underperformers included basic resources, oil & gas, food & beverage, and personal & household goods. Among companies in the news, Wirecard, the German online payments company, dropped 12 percent on a report in the Financial Times questioning its financial reporting. HelloFresh, the German supermarket, surged by 23 percent on an earnings beat and analyst upgrade.

In economic news, the UK labor market loosened slightly in August/September and wage pressures were also a little less marked. Claimant count joblessness rose a further, albeit less than expected, 21,100 in September after a smaller revised 16,300 gain in August. This left the unemployment rate unchanged at 3.3 percent. The report's ILO data showed the number of people out of work increasing by 22,000 to 1.314 million in the three months to August. This compares with a 51,000 decline in the three months to May and was large enough to lift the jobless rate by a tick to a surprisingly high 3.9 percent.

Separately, ZEW's October survey found analysts a little more pessimistic than in September. Even so, overall the results were on the firm side of the market consensus. Current conditions registered minus 25.3, down 5.4 points versus quarter-end, nearly 20 points short of its long-run average and their lowest reading since April 2010. At the same time, expectations slipped 0.3 points to minus 22.8.

Asia Pacific markets

Major Asian markets were mixed Tuesday, with trading resuming in Japan after Monday’s holiday. The Nikkei and Topix indices both made strong gains of 1.9 percent and 1.6 percent respectively as investors reacted to positive US-China trade news from late last week. Ongoing uncertainty about the details and sustainability of any trade deal, however, reportedly weighed on sentiment in Chinese markets, with the Shanghai Composite index closing down 0.6 percent on the day. Hong Kong’s Hang Seng index fell 0.1 percent on the day, while Australia’s All Ordinaries index advanced 0.1 percent.

China's consumer price index advanced 3.0 percent on the year in September, up from 2.8 percent in August, just above the consensus forecast of 2.9 percent, and the highest level since October 2013. Disruptions to pork supply remain the main factor pushing up headline inflation, with food price inflation picking up from 10.0 percent to 11.2 percent, whereas non-food price inflation moderated from 1.1 percent to 1.0 percent. Providing more evidence that broader price pressures remain subdued, the producer price index fell 1.2 percent on the year in September after dropping 0.8 percent in August, matching the consensus forecast.

The minutes for the Reserve Bank of Australia policy meeting at the start of October were published Tuesday. Officials at that meeting cut the main policy rate by 25 basis points to a new record low of 0.75 percent, following similar cuts in May and June. The minutes showed that officials expect that domestic unemployment and inflation outcomes over the next "couple of years" are likely "to be short" of their objectives. Although they discussed whether they should keep “in reserve” the ability to cut rates in response to potential future negative shocks, officials concluded that moving immediately could reduce the chances of such a negative shock taking place by providing additional support to the economy. The minutes also reaffirm officials' view that it is "reasonable to expect" that policy rates will need to stay low for an "extended period” and that officials would be prepared to cut rates again if needed.

Looking forward

On Wednesday in Asia/Pacific, New Zealand CPI figures are due. In Europe, the following data reports are due: Eurozone HICP. Italian CPI, and UK PPI/CPI. In North America, it’s Canadian CPI, plus US retail sales figures, US housing market index, US business inventories, and US beige book.

Global stock markets

 

Index

15 Oct 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27024.8

237.44

0.9

 

NASDAQ

8148.71

100.06

1.2

 

S&P 500

2995.68

29.53

1.0

Canada

S&P/TSX Comp

16418.39

3.23

0.0

Europe

 

 

 

 

UK

FTSE 100

7211.64

-1.81

0.0

France

CAC

5702.05

58.97

1.0

Germany

XETRA DAX

12629.79

143.23

1.2

Italy

MIB

22365.34

267.40

1.2

Spain

Ibex 35

9356.1

109.60

1.2

Sweden

OMX Stockholm 30

1670.21

17.63

1.1

Switzerland

SMI

10048.75

84.51

0.9

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6763.33

5.47

0.1

Japan

Nikkei 225

22207.21

408.34

1.9

 

Topix

1620.2

24.93

1.6

Hong Kong

Hang Seng

26503.93

-17.92

-0.1

S. Korea

Kospi

2068.17

0.77

0.0

Singapore

STI

3116.17

-8.28

-0.3

China

Shanghai Comp

2991.05

-16.83

-0.6

Taiwan

TAIEX

11111.8

44.85

0.4

India

Sensex 30

38506.09

291.62

0.8

*Markets closed

 

 

 

 

Note: all releases are listed in local time.

Important Information

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