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On 17 September 2019 - US firm, Europe flat; Asia mostly lower

Anne D Picker

Anne D Picker - Econoday

Markets cautious before Fed policy decision; oil prices retreat.

US markets

US equities edged up in muted trading Tuesday as markets awaited signals from the Federal Reserve’s policy committee due Wednesday. The Dow industrials rose 0.1 percent, the S&P 500 rose 0.3 percent, and the NASDAQ gained 0.4 percent.

Energy shares retreated as oil prices gave up some of the previous day’s gains, but markets remained cautious about the prospect of more clashes in the Middle East, which could threaten global oil supplies. The Saudi oil minister said his country’s oil production is completely back on line, Reuters reported.

Markets expect a 25 basis point rate cut from the Fed on Wednesday and will be watching for signs whether more rate cuts are likely. Expectations for one or more additional cuts have faded as US economic data have perked up, and Fed officials have been cautious about committing to more easing given uncertainty over the economic outlook and the US-China trade dispute. President Trump told reporters Tuesday a trade pact could come soon.

Among companies in focus, Corning, the glassmaker, fell 6 percent after cutting its sales outlook and citing “macro uncertainty.” Kraft Heinz was off 4.3 percent after a big private equity investor, 3G Capital, revealed it has reduced its stake in the big food company.

In US economic data, industrial production hit the top of Econoday's consensus range with a 0.6 percent gain and the strongest showing of the year, which should ease concerns about a US slowdown. Manufacturing production exceeded Econoday's consensus range, at a 0.5 percent monthly rise and the third gain in four months. Meanwhile,  the September housing market composite index jumped to 68 to exceed Econoday's consensus range. The current sales component was up 2 points to a very strong 75 and offering a positive indication for coming new home sales data as posted by the government.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil fell US$3.66 to US$64.06, while gold rose by US$4.70 to US$1,510.00. The US dollar fell against most major currencies. The US Treasury 30-year bond yield fell 4 basis points to 2.28 percent while the 10-year note yield fell 4 basis points to 1.81 percent.

European markets

European equities gave up early gains to end flat Tuesday in cautious trading ahead of Wednesday's Federal Reserve policy announcement, and as oil prices retreated from the previous day’s highs. The Europe-wide STOXX 600 eased 0.05 percent, the German DAX was off 0.06 percent, and the French CAC rose 0.2 percent. The UK FTSE-100 eased 0.01 percent.

Among shares in the Stoxx 600, outperformers included defensive sectors like real estate and utilities, while underperformers included banks, basic resources, autos, and oil & gas.  Oil stocks retreated from Monday’s highs as crude oil prices gave up some of the previous day’s gains spurred by the attacks on Saudi oil facilities.

And markets remained on edge over the prospect of more conflict in the Mideast, including the prospect of US retaliation. Attention also focused on UK maneuvering around Brexit, including an expected court ruling on the legality of Prime Minister Boris Johnson’s shutdown of Parliament.

In economic data, ZEW's September survey found analysts even more pessimistic about the current state of the German economy but less so with regard to the outlook. The current conditions gauge fell a further 6.4 points, its fourth straight decline and its eleventh drop in the last twelve months. At minus 19.9, the sub-index was some 92.5 points below its reading a year ago and at its lowest level since May 2010. By contrast, expectations posted a sizeable 21.6 point jump to minus 22.5.

Asia Pacific markets

Major Asian markets posted mixed results Tuesday. The Shanghai Composite index was the weakest performer, closing down 1.7 percent after officials kept liquidity conditions steady despite weak economic data published Monday. Hong Kong’s Hang Seng index also fell 1.2 percent after ratings agency Moody’s announced a downgrade to the outlook for Hong Kong’s sovereign rating from stable to negative, while Singapore’s Straits Time index fell 0.7 percent after weak trade data. Japanese shares rose marginally as trading resumed after a holiday Monday, with the Nikkei and Topix indices closing up 0.1 percent and 0.3 percent respectively, while Australia’s All Ordinaries index advanced 0.3 percent.

Singapore trade data were the highlight of the regional data calendar Monday. Singapore's non-oil domestic exports fell 8.9 percent on the year in August after dropping a revised 11.4 percent in July, with electronics exports posting a bigger year-on-year fall but non-electronics exports posting a smaller decline. There was significant variation in demand across Singapore's top ten trading partners in August, with demand from China and Japan improving but those to the United States and the European Union weakening. Total imports fell 6.4 percent on the year after falling a revised 6.5 percent previously.

Other data showed a third consecutive slowdown in Chinese house prices in August but a smaller decline in house prices in Australia for the three months to June, broadly in line with recent statements from Reserve Bank of Australia officials arguing that conditions have “steadied”. The minutes of the RBA's meeting held earlier this month were also published today and indicate that officials are likely to consider further cuts ins policy rates if  incoming labor market data indicate that spare capacity in the economy remains relatively high.

Looking forward

The big event Wednesday will be the Fed’s policy announcement. The Bank of Japan is also scheduled to reveal its latest policy decision. In Asian data, the Japanese merchandise trade report is due. In Europe, the UK CPI and PPI data, plus Eurozone HICP are scheduled for release. In North America, Canadian CPI is scheduled. In US data, housing starts and EIA Petroleum Status reports are due.

Global stock markets

 

Index

17 Sep 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27110.8

33.98

0.1

 

NASDAQ

8186.02

32.48

0.4

 

S&P 500

3005.69

7.73

0.3

Canada

S&P/TSX Comp

16834.75

83.44

0.5

Europe

 

 

 

 

UK

FTSE 100

7320.4

-1.01

0.0

France

CAC

5615.51

13.28

0.2

Germany

XETRA DAX

12372.61

-7.70

-0.1

Italy

MIB

21801.93

-167.31

-0.8

Spain

Ibex 35

9004.2

-47.80

-0.5

Sweden

OMX Stockholm 30

1649.33

-5.68

-0.3

Switzerland

SMI

10013.82

44.63

0.5

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6801.66

19.65

0.3

Japan

Nikkei 225

22001.32

13.03

0.1

 

Topix

1614.58

4.71

0.3

Hong Kong

Hang Seng

26790.24

-334.31

-1.2

S. Korea

Kospi

2062.33

0.11

0.0

Singapore

STI

3183

-20.93

-0.7

China

Shanghai Comp

2978.12

-52.63

-1.7

Taiwan

TAIEX

10874.5

-23.63

-0.2

India

Sensex 30

36481.09

-642.22

-1.7

*Markets closed

 

 

 

 

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.