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On 16 July 2019 - US weaker as trade worries return; Europe better, Asia off

Anne D Picker

Anne D Picker - Econoday

Energy stocks off as oil prices fall; tech off on Trump trade comment.

US markets

US stocks edged lower Tuesday after President Trump renewed his threat to impose more tariffs on Chinese exports, and said the US and China have a long way to go before they reach a trade accord. The Dow industrials slipped 0.1 percent; the S&P was off 0.3 percent, and the NASDAQ fell 0.4 percent.

Equities drew support from dovish comments from Chicago Fed President Charles Evans, who called for rate cuts, and from Fed Chair Jay Powell’s repeat of his comment that global uncertainties argue for policy accommodation.

Separately, energy stocks were hit by a selloff in oil prices, largely in response to US Secretary of State Mike Pompeo’s comment that Iran appears ready to negotiate in its dispute with the US. Oil driller Apache led the declines with a loss of 4.3 percent. Brent crude was off about 2.3 percent on the day.

Tech shares underperformed, with trade-sensitive semiconductors leading the declines. Industry leader Intel was off 1.9 percent. Meanwhile, Google (up 0.2 percent) recovered from an early selloff when Trump tweeted that he would “take a look” at charges that the tech giant works with the Chinese government. Google denied the allegation.

Among Dow component shares in focus, Goldman Sachs rose 1.9 percent after reporting Q2 earnings-per-share of $5.81, above the $4.89 FactSet estimate. JP Morgan Chase gained 1.1 percent after reporting EPS of $2.82, better than the expected $2.50, though other metrics disappointed. Johnson & Johnson was down 1.7 percent after reporting Q2 EPS of $2.08 vs. $2.46 expected. It also reaffirmed its full-year earnings outlook and raised its full-year revenue forecast.

In economic news, US retail sales results came in much stronger than expected in June. Total sales rose 0.4 percent, with ex-auto sales also up 0.4 percent -- both at the top end of Econoday's consensus range. Easily surpassing the top end of the consensus range are two of the report's key core readings, with sales less auto & less gas and also the control group up very sharply at 0.7 percent. Meanwhile, US industrial production was unchanged in June with manufacturing, however, up 0.4 percent in a solid showing.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was down US$1.58 to US$64.90 while gold fell US$8.70 to $1,404.80. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield was up 1 basis points at 2.62 percent while the yield on the 10-year note was up 2 basis points at 2.11 percent.

European markets

European equities rose Tuesday, with an earnings beat from luxury goods retailer Burberry lifting the sector, and upbeat US bank earnings boosting financials.

The European STOXX 600 and the German DAX both rose 0.4 percent, the French CAC rose 0.7 percent, and the UK FTSE 100 rose 0.6 percent. Outperformers included construction and materials, personal and household goods, and banks. Underperformers included telecom, utilities, and oil and gas.

Burberry rose 14 percent after news of a positive earnings surprise, and strong demand for its new designs, which boosted other luxury retailers LVMH (up 1.1 percent) and Kering (up 1.6 percent), and helped the CAC to outperform. In M&A, Austrian chipmaker AMS AG (up 3.5 percent) was in focus after abandoning its plan to take over Osram Licht, a lighting company.

Goldman Sachs and JP Morgan reported upbeat earnings Tuesday, which lifted European banks, including Barclays, up 0.8 percent, and Deutsche Bank, up 4 percent.

In economic news, the German ZEW report showed analysts were much more pessimistic about the German economy in July. The current conditions gauge dropped nearly 9 points to minus 1.1, its ninth fall in the last ten months and its steepest decline since February. Expectations eased a further 3.4 points to minus 24.5, their third straight fall and their worst outturn since October last year. Separately, UK data pointed to a cooling jobs market. Claimant count joblessness rose a sizeable 38,000 in June following an upwardly revised 24,500 gain in May. This was the sharpest increase since May 2009 and enough to nudge the jobless rate another tick higher to 3.2 percent, in line with market expectations.

Asia Pacific Markets

Most major Asian markets closed lower Tuesday, with Japanese shares posting the biggest declines. The Nikkei and Topix indices fell 0.7 percent and 0.5 percent respectively as currency strength boosted concerns about earning prospects for major exporters. The Shanghai Composite index and Australia’s All Ordinaries index also closed down 0.2 percent on the day. Hong Kong’s Hang Seng index outperformed with a modest increase of 0.2 percent.

New Zealand's consumer price index rose 1.7 percent on the year in the three months to June, up from 1.5 percent in the three months to March and closer to the mid-point of the Reserve Bank of New Zealand's target range of 1.0 percent to 3.0 percent. The index rose 0.6 percent on the quarter after increasing 0.1 percent previously. The increase in headline inflation largely reflects strong increases in housing costs and utilities charges. RBNZ officials at their last policy meeting late June forecast that headline CPI inflation will rise to the mid-point of the target range but noted that risks were skewed to the downside. Reflecting this assessment, they noted that policy rates may need to be lowered in coming months.

The Reserve Bank of Australia published the minutes of its July 2 meeting. Officials at that meeting lowered the policy interest rate by 25 basis points from 1.50 percent to a new record low of 1.25 percent. The minutes noted that significant spare capacity remains in the labour market and that the domestic economy could sustain a lower level of unemployment while achieving inflation consistent with the RBA’s inflation target of 2.0 percent to 3.0 percent. Reflecting this assessment, officials concluded that another cut in policy rates would help to "achieve more assured progress" towards the inflation target. This bias towards lower rates looks set to continue until there are clearer signs that this spare capacity has eroded.

Looking forward

On Wednesday in Asia, Singapore merchandise trade data are due. In Europe, it’s UK PPI and CPI, plus Eurozone HICP. In North America, Canada has CPI and manufacturing sales, and the US has housing starts, EIA Petroleum Status, and Beige Book.

Global Stock Markets

 

Index

16 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27335.63

-23.53

-0.1

 

NASDAQ

8222.8

-35.39

-0.4

 

S&P 500

3003.98

-9.04

-0.3

Canada

S&P/TSX Comp

16501.68

-3.43

0.0

Europe

 

 

 

 

UK

FTSE 100

7577.2

45.48

0.6

France

CAC

5614.38

36.17

0.6

Germany

XETRA DAX

12430.97

43.63

0.4

Italy

MIB

22204.08

26.03

0.1

Spain

Ibex 35

9377.1

53.50

0.6

Sweden

OMX Stockholm 30

1630.57

-2.34

-0.1

Switzerland

SMI

9850.52

41.94

0.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6735.8

-10.40

-0.2

Japan

Nikkei 225

21535.25

-150.65

-0.7

 

Topix

1568.74

-7.57

-0.5

Hong Kong

Hang Seng

28619.62

64.74

0.2

S. Korea

Kospi

2091.87

9.39

0.4

Singapore

STI

3360.03

12.08

0.4

China

Shanghai Comp

2937.62

-4.57

-0.2

Taiwan

TAIEX

10886.05

9.62

0.1

India

Sensex 30

39131.04

234.33

0.6

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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