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On 18 June 2019 - US stocks edge up as tech recovers, energy shares rise with oil prices

Anne D Picker

Anne D Picker - Econoday

ECB’s Draghi boosts anticipation of monetary accommodation.

US markets

US equities rallied Tuesday as dovish comments from ECB President Mario Draghi pointed to near-term ECB easing, on top of expectations for policy support from the Fed, and hopes for other central banks to follow suit.

Markets also got a boost when President Trump said he would meet with Chinese President Xi at the G20 meeting next week, and that bilateral trade talks would soon resume.

Draghi said the ECB Governing Council would consider easing “in coming weeks” and that stimulus would be needed “in the absence of improvement.” Markets judged that to mean ECB action as early as the July 25 policy meeting, either a shift to an easing bias, or actual easing steps, such as rate cuts, forward guidance, or quantitative easing.

Markets were already on high alert for easing signals after the Fed’s policy-making Federal Open Market Committee meeting ends Wednesday.  Expectations are rising for accommodative policy shifts from the BOJ, also on Wednesday, and perhaps from the Bank of England on Thursday.

The Dow industrials rose 1.4 percent; the S&P 500 rose 1 percent, and the NASDAQ was up 1.4 percent.

Trade-sensitive stocks, including chipmakers, were big winners. Intel rose 2.7 percent, Nvidia rose 5.4 percent, Xilinx gained 7 percent, and Advanced Micro Devices was up 4.3 percent. Aerospace giant Boeing rose 5.4 percent. Oil stocks and drillers rose, with Apache up 2.9 percent, as oil prices advanced.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was up US$0.25 at US$62.29 while gold was up US$13.29 at $1,346.34. The US dollar was higher against most major currencies. The yield on the US Treasury 30-year bond was unchanged at 2.58 percent while the yield on the 10-year note was flat at 2.08 percent.

European markets

European equities surged Tuesday on comments from ECB President Mario Draghi pointing to near-term ECB easing, and on news suggesting US-China trade talks would resume.

Draghi said the ECB Governing Council would consider easing “in coming weeks.”

The European STOXX 600 rose 1.8 percent, the German DAX rose 2 percent, the French CAC gained 2.2 percent, and the UK FTSE 100 gained 1.2 percent.

Trade-sensitive sectors such as autos and commodities stocks led the gains. Miner BHP Group climbed 2.5 percent, while Glencore rose 3 percent. Automaker Daimler rose 2.5 percent, and VW gained 2.4 percent. Chipmaker Siltronic dropped 8.7 percent after issuing a profits warning.

In economic news, the June ZEW survey found analysts marginally less confident about the current state of the German economy and increasingly pessimistic about the outlook. The current conditions gauge dipped 0.4 points to 7.8. This reversed part of May's 2.7-point gain but was still the second weakest reading since November 2014. Expectations declined a sizeable 19 points to minus 21.1, their steepest drop since July 2016 and the lowest mark since last November.

Eurozone inflation was unrevised in the final data for May. A 0.1 percent monthly rise in the HICP put the yearly rate at 1.2 percent, in line with its flash estimate and still 0.5 percentage points below its final 1.7 percent reading in April. The fall more than fully unwound the previous month's Easter-led spike and leaves inflation equaling its lowest level since February 2018.

Asia Pacific Markets

Asian markets were mixed Tuesday ahead of the Federal Reserve meeting. Hong Kong’s Hang Seng index was the strongest regional performer, up 1.0 percent on the day after the government took further steps to placate opposition to its proposed extradition legislation. Australia’s All Ordinaries index advanced 0.6 after central bank minutes signaled that further policy rate cuts are likely in coming months, while the Shanghai Composite index closed up 0.1 percent. Japanese markets underperformed with the Nikkei and Topix indices both dropping 0.7 percent on the day.

The Reserve Bank of Australia published the minutes of its June 4 meeting Tuesday. 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 show that officials’ views on the outlook for domestic growth and inflation were little changed from previously, but confirmed that their assessment of labour conditions had changed. In particular, officials judged that there remains significant spare capacity in the labour market so that there is scope for the unemployment rate to fall without triggering a spike in inflation.

Reflecting this assessment, RBA officials concluded that a rate cut at the June meeting would help inflation return to its target range more quickly. The minutes also noted that officials consider "it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead." Since this meeting took place, labour market data published last week showed that the unemployment rate was unchanged in May, likely reinforcing the view of officials that rates can be lowered again in coming months. Australian house price data published today also showed that weakness in the housing market has extended into the new year, with house prices falling both on the quarter and on the year in the three months to March, led by substantial declines in the two largest cities, Sydney and Melbourne. Chinese data showed steady growth in house prices in May.

Looking forward

The BOJ policy announcement is due Wednesday, followed later in the day by results of the Fed’s policy-making FOMC meeting, including a press conference by the Fed chairman. In data, Japanese merchandise trade data are due. European releases include German PPI, Italian merchandise trade, UK CPI and PPI. The North American calendar is light.

Global Stock Markets

 

Index

18 Jun 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26465.54

353.01

1.4

 

NASDAQ

7953.88

108.86

1.4

 

S&P 500

2917.75

28.08

1.0

Canada

S&P/TSX Comp

16503.35

149.90

0.9

Europe

 

 

 

 

UK

FTSE 100

7443.04

85.73

1.2

France

CAC

5509.73

118.78

2.2

Germany

XETRA DAX

12331.75

245.93

2.0

Italy

MIB

21133.78

507.36

2.5

Spain

Ibex 35

9240.7

109.00

1.2

Sweden

OMX Stockholm 30

1609.43

22.90

1.4

Switzerland

SMI

9988.55

136.98

1.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6647.93

38.48

0.6

Japan

Nikkei 225

20972.71

-151.29

-0.7

 

Topix

1528.67

-11.07

-0.7

Hong Kong

Hang Seng

27498.77

271.61

1.0

S. Korea

Kospi

2098.71

7.98

0.4

Singapore

STI

3238.73

30.74

1.0

China

Shanghai Comp

2890.16

2.54

0.1

Taiwan

TAIEX

10566.74

36.20

0.3

India

Sensex 30

39046.34

85.55

0.2

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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