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On 18 July 2019 - Lack of trade progress pulls Asia and Europe lower

Anne D Picker

Anne D Picker - Econoday

US shares mixed as Netflix weighs but rate-cut hopes build.

US markets

US stocks were flat to higher Thursday boosted by rate-cut expectations but held back by unresolved US-China trade issues and a 10 percent drop in shares of Netflix which reported an unexpected decline in US subscribers. The Dow posted a fractional rise with the S&P up 0.4 percent and the Nasdaq up 0.3 percent.

There were no tangible developments on the trade front in the session though US and Chinese officials are reportedly resuming contact in an effort to schedule new talks. New York Federal Reserve President John Williams appeared to give the market a lift late in the session, stressing the importance that policy makers "act quickly" to stem the first signs of economic distress.

Yet Thursday's economic data are the latest pointing to strength not distress, led by initial jobless claims which came in at 216,000 in the July 13 week which was also the sample week of the July employment report. A comparison with the sample week of the June employment report points to strong and steady expansion of the labor market. Also strong was the Philadelphia Fed report which jumped more than 20 points to 21.8 to signal very strong growth this month for the sample. These reports join a rising batch of data, including Tuesday's retail sales report, that are pointing to accelerating conditions at the same that the Federal Reserve appears ready to cut interest rates.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude was down US$1.14 at US$62.46 while gold rose US$23.60 to $1,446.90. The US dollar fell against most major currencies. The yield on the US Treasury 30-year bond yield was up 1 basis point at 2.57 percent while the yield on the 10-year note was down 2 basis points at 2.03 percent.

European markets

Markets were mostly lower for a second session in a row, held down by lack of improvement in US-China trade tensions and despite continued expectations for approaching rate cuts from both the European Central Bank and the Federal Reserve.

UK's FTSE fell 0.6 percent with France's CAC down 0.4 percent and Germany's Dax down 0.9 percent. Shares of software giant SAP fell sharply on a downbeat outlook.

Rising 0.7 percent, the Swiss Market Index bucked the day's trend in Europe. Switzerland's trade surplus widened from CHF3.40 billion in May to CHF4.10 billion in June, its strongest showing since last November. However, the improvement masked a contraction in both sides of the balance sheet as exports fell 0.7 percent on the year while imports slumped some 9.0 percent. 

Other economic data include a surprisingly robust retail sales report out of the UK. Following a 0.6 percent monthly decrease in May, volumes rebounded 1.0 percent in June for their first gain since March. Annual growth jumped from 2.2 percent, a 13-month low, to 3.8 percent. 

Asia Pacific Markets

Major Asian markets closed lower Thursday, with Japanese shares underperforming after data showed another month of weak exports growth. The Nikkei and Topix indices fell 2.0 percent and 2.2 percent on the day, with major exporters including Canon, Panasonic and Hitachi among those losing ground. Companies involved in the animation industry sold off after a deadly arson attack on an animation studio in Kyoto. The Shanghai Composite index also posted a heavy fall, down 1.1 percent, while Hong Kong’s Hang Seng index and Australia’s All Ordinaries fell 0.5 percent and 0.4 percent respectively. 

Japan's merchandise trade balance shifted from a revised deficit of Y968.3 billion in May to a surplus of Y589.5 billion in June, bigger than the consensus forecast for a surplus of Y426 billion. Exports fell 6.7 percent on the year in June after dropping 7.8 percent in May, more than the consensus forecast for a decline of 5.3 percent, and broadly in line with previously released Chinese and Singaporean data also indicating subdued trade flows in June. Year-on-year growth in imports weakened from a decline of 1.5 percent to a fall of 5.2 percent, again bigger than the consensus forecast for a 0.6 percent fall.

Australia's labour market saw an increase of 500 in the number of employed persons in June (seasonally adjusted), well down from an increase of 42,300 in May and falling short of the consensus forecast for an increase of 10,000. The unemployment rate was unchanged at 5.2 percent in June, matching the consensus forecast, while the participation rates also unchanged and in line with the consensus forecast at 66.0 percent. Thursday’s data will likely reinforce the view of officials at the Reserve Bank of Australia that there remains significant spare capacity in the labour market. This assessment was a significant factor driving their decision to lower policy rates at their last two meetings and likely boosts the chances that a further rate reduction will be considered in coming months.

Looking forward

Friday's data open with consumer prices out of Japan followed by producer prices from Germany and the latest public sector finance data out of the UK. Canada will post retail sales while consumer sentiment will be reported in the US.

Global Stock Markets

 

Index

18 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27222.97

3.12

0.0

 

NASDAQ

8207.24

22.03

0.3

 

S&P 500

2995.11

10.69

0.4

Canada

S&P/TSX Comp

16494.23

10.02

0.1

Europe

 

 

 

 

UK

FTSE 100

7493.09

-42.37

-0.6

France

CAC

5550.55

-21.16

-0.4

Germany

XETRA DAX

12227.85

-113.18

-0.9

Italy

MIB

22090.81

11.43

0.1

Spain

Ibex 35

9225.70

-58.50

-0.6

Sweden

OMX Stockholm 30

1577.41

-20.65

-1.3

Switzerland

SMI

10010.15

68.14

0.7

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6735.43

-28.62

-0.4

Japan

Nikkei 225

21046.24

-422.94

-2.0

 

Topix

1534.27

-33.14

-2.2

Hong Kong

Hang Seng

28461.66

-131.51

-0.5

S. Korea

Kospi

2066.55

-6.37

-0.3

Singapore

STI

3361.05

-3.82

-0.1

China

Shanghai Comp

2901.18

-30.51

-1.1

Taiwan

TAIEX

10799.28

-29.20

-0.3

India

Sensex 30

38897.46

-318.18

-0.8

Note: all releases are listed in local time.

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