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On 16 October 2019 - US, Europe flat to down on Brexit, trade uncertainty; Asia gains

Anne D Picker

Anne D Picker - Econoday

US retail sales report adds to market worries.

US markets

US equities were flat to lower Wednesday amid uncertainty over expected deals on US-China trade and Brexit. The Dow industrials eased 0.1 percent, the S&P 500 declined 0.2 percent, and the NASDAQ was off 0.3 percent.

A miss in US retail sales, down 0.3 percent vs. expectations for up 0.3 percent, raised market concerns that consumption, which has kept the US economy growing, may be losing steam, even if the underlying retail sales trend looks fine. Meanwhile, on the US-China trade front, markets were not surprised by President Trump’s comment that he was unlikely to sign a trade accord until he meets Chinese President Xi in late November, but the wait for a result is weighing on sentiment. Separately, markets have been disappointed that an expected Brexit deal has not yet been forthcoming.

Earnings news was generally supportive, including Bank of America, up 1.5 percent, after it registered quarterly earnings and revenues beats. Bank of New York Mellon rose 0.2 percent after an earnings beat but revenues miss. Achillion Pharmaceuticals rocketed 72 percent after announcing it would be acquired by Alexion Pharmaceuticals, which fell 5.1 percent. United Airlines rose 2.1 percent after an earnings beat and raising its forecast. Among sectors, technology shares depressed the stock averages, with Microsoft down 0.8 percent. Energy shares also fell, despite an uptick in crude oil prices.

In US economic news, the consumer cooled but not enough to not knock back a still rising trend for retail sales, which in September fell an unexpected 0.3 percent. All the breakdowns also came in well below expectations including a 0.1 percent dip when autos (one of September's weaknesses) are excluded and no change when also excluding gasoline. Separately, the Fed’s Beige Book offered a downbeat assessment of prevailing economic conditions. The overall assessment of economic activity had been "modest" in the last three reports going back to June with Wednesday's description now "slight to modest.” Nonresidential spending is slowing to a still modest pace, while manufacturing overall is said to continue to "edge lower."

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 45 cents to US$59.30, while gold rose by US$8.90 to US$1,493.30. The US dollar fell against most major currencies. The US Treasury 30-year bond yield declined 1 basis point to 2.23 percent while the 10-year note yield fell 3 basis points to 1.74 percent.

European markets

European equities were steady to lower Wednesday amid uncertainty over last-minute efforts to salvage a Brexit deal. The Europe-wide STOXX 600 eased 0.1 percent, the German DAX rose 0.3 percent, and the French CAC was off 0.1 percent. The export-heavy UK FTSE-100 fell 0.6 percent, while the domestic-focused UK FTSE-250 slipped 0.1 percent.

European markets rallied Tuesday on reports pointing to a Brexit deal, but conflicting headlines Wednesday left markets uncertain, and slightly deflated. Attention will turn next to the EU summit getting under way Thursday after EU-UK talks Tuesday did not yield results.

Among shares in the Stoxx 600, outperformers included autos & parts, banks, and personal & household goods. Underperformers included financial services, basic resources, especially miners, insurance, and media. Among companies in the news, carmakers advanced on news of upbeat European auto sales results. French automaker Renault rose 1.1 percent, and Germany’s Daimler rose 1.5 percent. Meanwhile, miners fell, with Rio Tinto down 1.7 percent after cutting its production forecast.

In economic news, UK consumer prices rose a smaller than expected 0.1 percent on the month in September, leaving their annual rate unchanged at 1.7 percent. Accordingly, inflation remains below its 2 percent medium-target.

Asia Pacific markets

Most major Asia markets advanced Wednesday, with investor sentiment supported by positive US earnings reports and indications that a Brexit deal appeared to be imminent. Australia’s All Ordinaries index advanced 1.2 percent on the day, while Japan’s Nikkei and Topic indices gained 1.2 percent and 0.7 percent respectively and Hong Kong’s Hang Seng index closed up 0.6 percent. Korea’s Kospi index gained 0.7 percent after the Bank of Korea cut policy rates for the second time in three months, in line with expectations and in line with the recent regional trend in favour of policy easing. The Shanghai Composite index underperformed, closing down 0.4 percent on the day.

New Zealand's consumer prices rose 1.5 percent on the year in the September quarter, down from 1.7 percent in the prior quarter and further below the mid-point of the Reserve Bank of New Zealand's target range of 1.0 percent to 3.0 percent. RBNZ officials expressed confidence that inflation would increase gradually to around 2.0 percent at their most recent policy meeting late September. Officials left policy rates on hold at that meeting after cutting them in August and May, consistent with the recent pattern for them to wait for quarterly inflation and employment data before adjusting policy settings, but they also stressed that there remained scope for further policy easing if necessary. The fall in the latest inflation data likely boosts the chances that policy rates will be cut again at the next policy meeting scheduled for mid-November.

Looking forward

On Thursday in Asia/Pacific, Australian labor force and Singapore merchandise trade figures are due. In Europe, Swiss merchandise trade and UK retail sales figures are due. In North America, it’s Canadian manufacturing sales data, plus US EIA petroleum, US EIA natural gas, US housing starts, US industrial production, US jobless claims, and US Philadelphia Fed manufacturing figures.

Global stock markets

 

Index

16 Oct 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27001.98

-22.82

-0.1

 

NASDAQ

8124.18

-24.53

-0.3

 

S&P 500

2989.69

-5.99

-0.2

Canada

S&P/TSX Comp

16427.18

8.79

0.1

Europe

 

 

 

 

UK

FTSE 100

7167.95

-43.69

-0.6

France

CAC

5696.9

-5.15

-0.1

Germany

XETRA DAX

12670.11

40.32

0.3

Italy

MIB

22428.09

62.75

0.3

Spain

Ibex 35

9386.7

30.60

0.3

Sweden

OMX Stockholm 30

1677.19

6.98

0.4

Switzerland

SMI

10032.49

-16.26

-0.2

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6843.22

79.89

1.2

Japan

Nikkei 225

22472.92

265.71

1.2

 

Topix

1631.51

11.31

0.7

Hong Kong

Hang Seng

26664.28

160.35

0.6

S. Korea

Kospi

2082.83

14.66

0.7

Singapore

STI

3134.71

18.54

0.6

China

Shanghai Comp

2978.71

-12.34

-0.4

Taiwan

TAIEX

11162.83

51.03

0.5

India

Sensex 30

38598.99

92.90

0.2

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.