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On 16 May 2019 - Global stocks rally despite deepening US-China trade tensions

Anne D Picker

Anne D Picker - Econoday

No-deal Brexit concerns sink pound; Expectations of Chinese stimulus help Shanghai.

US markets

New chapters in the US-China trade dispute did not hold down US shares which extended Wednesday's rally with a 0.8 percent gain for the Dow and a 1.0 percent rise for the Nasdaq. 

Comments from China's foreign ministry that the nation would retaliate against the US ban of Huawei products on national security grounds do not point to easing tensions. Chinese officials say they cannot confirm that trade talks with the US will soon resume.

Yet focus was not on China but on network equipment maker Cisco and Wal-Mart which both rose sharply after posting quarterly earnings. Amazon also rose sharply on news that Warren Buffett's Berkshire Hathaway has a $900 million stake in the company.

Unlike Wednesday when retail sales and industrial production were downbeat, Thursday's data included solid gains for housing starts and permits, a better-than-expected Philadelphia Fed manufacturing report that showed no initial effects from ongoing trade tensions, and a sharp fall in initial unemployment claims that hints at a favorable employment report for May.

These data reflect observations at 4:00 PM US ET. Dated Brent spot crude was up US$0.72 to $72.73 while gold was US$10.30 lower at $1,286.80. The US dollar rose against the Australian dollar, the pound, the euro, the Canadian dollar, the yen, the Swiss franc and the yuan. The yield on the US Treasury 30-year bond was up 2 basis points at 2.84 percent while the yield on the 10-year note rose 2 basis points to 2.40 percent.

European markets

Rebound from last week's trade tensions extended into Thursday led by a 1.7 percent gain for the DAX and including 1.4 percent gains for the CAC, Italy's FTSE MIB, and Spain's Ibex. The FTSE gained 0.8 percent on the day.

The pound fell sharply in the session on talk that the risk of a no-deal Brexit may be climbing as hardline Brexiteers including former foreign secretary Boris Johnson throw their hat in the ring to replace Theresa May. May said on Thursday that next month she will deliver a time table for her departure.

Joblessness in metropolitan France fell 19,000 in the first quarter following a 100,000 drop at the end of 2018. This put the number of people out of work at 2.441 million, its lowest reading since the first quarter of 2009, and the unemployment rate at 8.4 percent, a tick down on the previous period. Nonetheless, the rate remains above the Eurozone average (7.7 percent in March) and remains a major issue for government policy.

Switzerland's Nestle rose on news it's in talks to sell its skin health business to a private equity firm in a deal valued at 10.2 billion Swiss francs. Germany's Thyssenkrupp rose sharply on a report that Kone of Finland may bid for the company's elevator unit.

Asia Pacific Markets

Chinese shares rose Thursday on hopes for government stimulus after weak economic data, while Asian markets elsewhere suffered from news of US sanctions on Chinese telecom firms and concerns over a wider slowdown in Chinese demand.

The Shanghai composite rose 0.6 percent helped by anticipated policy easing from the People's Bank of China after Wednesday's weak industrial production and retail sales data. Chinese telecom giants Huawei and ZTE, and Chinese suppliers to those firms, plus Apple, fell sharply Thursday after the US banned sales of Huawei and ZTE. Other Chinese shares, especially cyclicals, were lifted by hopes for PBOC support.

Korea's KOSPI fell 1.2 percent and Singapore's Straits Times index was fractionally lower as worries about a slowdown in China and fallout from the US action on Chinese telecoms dominated.

Australia's All Ordinaries rose 0.7 percent as a rise in the unemployment rate for April renewed talk of pending rate cuts from the Reserve Bank of Australia. Mining and energy shares led the way as commodity prices continued their recent advance. Oil prices have risen on worries about supply disruption in the Mideast.

Australia's unemployment rate unexpectedly rose from 5.0 percent in March to 5.2 percent in April in what, however, was an otherwise solid report. Inflation news out of Japan continues to be soft with April's producer price index slipping 1 tenth on the year to 1.2 percent.

Looking forward

New Zealand producer prices, Singapore merchandise trade and Japan's tertiary index will be posted on Friday. Harmonised consumer prices will be released in Europe with consumer sentiment and leading indicators in the US.

Global Stock Markets

 

Index

May 16 2019

Daily Change

%Change Daily

North America

United States

Dow

25862.68

214.66

0.8

 

NASDAQ

7898.05

75.90

1.0

 

S&P 500

2876.32

25.36

0.9

Canada

S&P/TSX Comp

16443.86

125.72

0.8

Europe

UK

FTSE 100

7353.51

56.56

0.8

France

CAC

5448.11

73.85

1.4

Germany

XETRA DAX

12310.37

210.80

1.7

Italy

MIB

21151.8

288.66

1.4

Spain

Ibex 35

9304.3

127.20

1.4

Sweden

OMX Stockholm 30

1615.38

22.06

1.4

Switzerland

SMI

9660.59

179.83

1.9

Asia/Pacific

Australia

All Ordinaries

6417.49

46.59

0.7

Japan

Nikkei 225

21062.98

-125.58

-0.6

 

Topix

1537.55

-6.60

-0.4

Hong Kong

Hang Seng

28275.07

6.36

0.0

S. Korea

Kospi

2067.69

-25.09

-1.2

Singapore

STI

3230.26

11.49

0.4

China

Shanghai Comp

2955.71

17.03

0.6

Taiwan

TAIEX

10474.61

-86.10

-0.8

India

Sensex 30

37393.48

278.60

0.8

*Markets closed
Data Source - Haver Analytics

Note: all releases are listed in local time.

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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.