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On 15 March 2019 - Global stocks advance on hopes of an orderly Brexit and progress on US-China trade talks

Anne D Picker

Anne D Picker - Econoday

Data shows subdued inflation in Europe and weakness in the US manufacturing sector.

US markets

US stocks closed higher Friday, extending gains made over the week. The Dow rose 0.5 percent on the day and 1.6 percent on the week, the S&P advanced 0.5 percent on the day and 2.9 percent on the week, and the Nasdaq outperformed with an increase of 0.8 percent on the day and 3.8 percent on the week. Reports of progress in US-China trade talks were cited as a factor supporting investor sentiment Friday, while the United Kingdom parliament’s decision late Thursday to seek a delay to Brexit eased concerns about a disorderly withdrawal by the UK from the European Union. 

Boeing rose Friday, reversing only some of the sharp losses made earlier in the week after one of its 737 MAX planes crashed, with reports indicating that the company will upgrade the aircraft’s software. Chip-maker Broadcom rallied after reporting strong first quarter results and a positive outlook. Electric car manufacturer Tesla fell after the company announced details of a new model but indicated that it will be available for sale later than previously anticipated.

Industrial production data published Friday showed further weakness in the manufacturing sector. Output increased 0.1 percent on the month in February, rebounding from a revised decline of 0.4 percent in January but falling short of the consensus forecast of 0.4 percent. This headline increase, however, was mainly driven by a strong increase in the often-volatile utilities sector where output increased 3.7 percent on the month after sharp declines in each of the two previous months. Manufacturing output, in contrast, fell for a second consecutive month, down 0.4 percent after a revised decline of 0.5 percent in January, the first back-to-back contraction in the sector since mid-2017 and consistent with signals from recent regional surveys including the Philadelphia Fed and Empire State reports.

These data reflect observations at the close of trading Friday. Gold rose US$7.80 to US$1,302.90 while dated Brent spot crude fell US$0.07 to US$67.16. The US dollar made a small gain against the Canadian dollar, was flat against the pound and weakened slightly against other major currencies. The yield on the US Treasury 30 year bond fell 3 basis points to 3.01 percent while the 10 year note fell 4 basis points to 2.59 percent.

European markets

Most European markets closed higher Friday and on the week, with the likely delay to the UK’s withdrawal from the European Union reassuring investors that a disruptive no-deal Brexit will be avoided. The FTSE rose 0.6 percent on the day and 1.7 percent on the week, the CAC outperformed with an increase of 1.0 percent on the day and 3.3 percent on the week, and the DAX closed up 0.8 percent on the day and 2.0 percent on the week.

Deutsche Bank fell slightly while Commerzbank closed higher Friday as speculation continued about a merger between the two German banks. Both banks confirmed over the weekend that merger talks are underway, with the German government indicating its support but unions objecting on concerns about job losses. A merger between the two banks would likely result in the third largest European bank behind HSBC and BNP Paribas.

Revised Eurozone inflation data confirmed a 0.3 percent increase in the consumer price index in February, rebounding from a fall of 1.0 percent in January, with inflation picking up from 1.4 percent to 1.5 percent the first increase in four months. Core measures of inflation were also unrevised from preliminary estimates and show that underlying price pressures remain subdued. Italian data showed a fall in headline inflation from 1.1 percent in January to 1.0 percent in February.

UK Prime Minister Theresa May indicated over the weekend that she will present her Brexit deal to parliament again in the coming week even though legislators rejected it last week and voted to delay withdrawal from the EU. She has told legislators that if they approve the deal before the EU leaders summit scheduled to take place on Thursday then withdrawal will be able to take place with only a short delay but that if it is rejected again Brexit will be postponed for many months, perhaps indefinitely. 

Asia Pacific Markets

Most Asian markets closed higher Friday and advanced to varying degrees on the week. The Shanghai Composite index rose 1.0 percent on the day and 1.7 percent on the week, while Hong Kong’s Hang Seng index gained 0.6 percent on the day and 2.8 percent on the week. These gains followed a report in Chinese state media stating that there had been further “substantive progress” on trade talks between China and the United States. Australia’s All Ordinaries index was the regional underperformer, closing flat on the day Friday and losing 0.4 percent on the week.

Japanese markets also rose Friday after the Bank of Japan left policy setting unchanged, with the Nikkei increasing 0.8 percent on the day and 2.0 percent on the week and the Topix gaining 0.9 percent on the day and 1.9 percent on the week. The BoJ's short-term policy rate for excess reserves remains at minus 0.1 percent while the target level for the long-term 10-year yield remains at around zero percent. Officials expressed a more cautious view about the near-term external outlook but retained their assessment that the domestic economy will continue to expand moderately, and that inflation will gradually move towards their target level of 2.0 percent. Speaking after the decision, BoJ Governor Haruhiko Kuroda dismissed recent suggestions that officials should raise policy rates to assist the profitability of domestic banks even if this were to make it more difficult to hit the inflation target. Instead, he insisted that the current target remains appropriate and that policy will continue to be set with that target as the objective.

Looking forward

Central Bank activities

19-Mar

Australia

Reserve Bank of Australia minutes

20-Mar

Japan

Bank of Japan minutes

 

US

Federal Reserve policy announcement

21-Mar

Switzerland

Swiss National Bank policy announcement

 

UK

Bank of England policy announcement & minutes

The following indicators will be released this week...

Europe

18-Mar

Eurozone

Merchandise Trade (January)

19-Mar

Germany

Ifo Survey (March)

   

ZEW Survey (March)

 

UK

Labour Market Report (February)

20-Mar

UK

CPI (February)

21-Mar

Eurozone

Consumer Confidence Flash (March)

 

UK

Retail Sales (February)

22-Mar

Eurozone

PMI Composite Flash (March)

 

France

PMI Composite Flash (March)

 

Germany

PMI Composite Flash (March)

Asia Pacific

18-Mar

Japan

Merchandise Trade (February)

 

Singapore

Merchandise Trade (February)

19-Mar

Australia

Residential Property Prices (Q4)

21-Mar

Australia

Labour Force Survey (February)

 

Hong Kong

CPI (February)

 

New Zealand

GDP (Q1)

22-Mar

Japan

CPI (February)

   

PMI Manufacturing Flash (March)

Americas

19-Mar

US

Factory Orders (January)

22-Mar

Canada

CPI (February)

   

Retail Sales (January)

 

US

Existing Home Sales (February)

Global Stock Markets

 

Index

Mar 15 2019

Daily Change

% Change Daily

North America

United States

Dow

25848.87

138.93

0.5

 

NASDAQ

7688.53

57.62

0.8

 

S&P 500

2822.48

14.00

0.5

Canada

S&P/TSX Comp

16140.35

52.80

0.3

Europe

UK

FTSE 100

7228.28

42.85

0.6

France

CAC

5405.32

55.54

1.0

Germany

XETRA DAX

11685.69

98.22

0.8

Italy

MIB

21045.41

167.98

0.8

Spain

Ibex 35

9342.2

132.40

1.4

Sweden

OMX Stockholm 30

1595.76

5.00

0.3

Switzerland

SMI

9483.1

1.20

0.0

Asia/Pacific

Australia

All Ordinaries

6265.06

-1.73

0.0

Japan

Nikkei 225

21450.85

163.83

0.8

 

Topix

1602.63

14.34

0.9

Hong Kong

Hang Seng

29012.26

160.87

0.6

S. Korea

Kospi

2176.11

20.43

0.9

Singapore

STI

3200.18

2.26

0.1

China

Shanghai Comp

3021.75

31.06

1.0

Taiwan

TAIEX

10439.24

90.59

0.9

India

Sensex 30

38024.32

269.43

0.7

Source: Haver Analytics

Note: all releases are listed in local time.

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