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On 18 November 2019 - US flat to up, Europe flat to lower on mixed trade news; Asia gains

Anne D Picker

Anne D Picker - Econoday

Defensive sectors lead amid US-China trade uncertainty.

US markets

US equities edged up Monday on a mixed US-China trade picture, with help from news that the US had extended licenses to allow US firms to continue doing business with Chinese telecom Huawei. The Dow industrial average, the S&P 500, and the NASDAQ all rose 0.1 percent.

The positive Huawei news, and a report of another high-level weekend call between US and Chinese trade officials, were partly offset by an earlier report on CNBC that suggested the talks were bogged down over whether the US would roll back tariffs as part of an interim trade pact.

Defensive sectors outperformed amid the trade uncertainty, with home and personal care staples leading. Energy was the big loser, with oil prices off, and industrials and health care lagging as well.

Among companies in the news, Hewlett Packard, the technology company, rose 0.2 percent after its board rejected an unsolicited takeover from Xerox, the printer company, which was up 0.9 percent.

In US economic news, the National Association of Home Builders’ housing market index fell back 1 point to 70 in November which, outside of October's 71, is the best showing so far this year. Six-month sales, at 77, lead components with present sales right behind at 76 and traffic still over 50 at 53, which though subdued relative to the sales components, is among the very best readings of the expansion.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.08 to US$62.24, while gold rose by US$5.10 to US$1,472.10. The US dollar declined against most major currencies. US Treasury 30-year bond yield fell 1 basis points to 2.30 percent, and the US 10-year note yield fell 2 basis points to 1.81 percent.

European markets

Major European equities indexes were flat to weaker Monday on renewed US-China trade worries, and as auto stocks were hit by a profits warning from VW, the German automaker. The Europe-wide STOXX 600 was off 0.01 percent, the German DAX slipped 0.3 percent, the French CAC declined 0.2 percent, and the UK FTSE-100 rose 0.1 percent.

Risk assets reacted badly to a CNBC report that a Chinese government source said Beijing was not happy over U.S unwillingness to reverse tariffs on Chinese goods as part of a trade deal, and that Chinese officials believe the US side had reneged on its agreement to do so. A separate report said senior US and Chinese officials had a constructive telephone call on Saturday, and markets rallied Friday on White House economic adviser Larry Kudlow’s claim that a trade deal is imminent.

The export-oriented UK FTSE-100 was restrained by sterling’s latest strength on polls suggesting rising support for the UK Conservative Party, which have raised market expectations that Parliament will approve Prime Minister Boris Johnson’s Brexit plan.

Defensive sectors held up relatively well, with real estate, utilities, and health care posting gains, to offset some of the losses in autos and in trade-sensitive sectors such as oil & gas, basic resources, and industrials. Winners included big UK pharma stocks GlaxoSmithKline, up 0.9 percent, and AstraZeneca, up 1.9 percent.

In the auto sector, VW fell 3.3 percent after warning its 2020 sales and profits would fall short of expectations due to a slowdown in business. Peugeot, the French automaker, fell 3 percent after an analyst downgrade. On the positive side, financial stocks here helped by a rally in Spanish stock exchange BME, which rose 38 percent on news of multiple bidders to acquire the exchange.

Asia Pacific markets

Most major Asian markets closed higher Monday on signs of progress in US-China trade talks. Wall Street gained on Friday in response to positive comments on trade talks from White House economic advisor Larry Kudlow that were followed over the weekend by reports in Chinese state media that Vice Premier Liu He had “constructive discussions” with Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. Investor sentiment was also boosted by the People’s Bank of China’s decision to cut its seven-day reverse repo rate from 2.55 percent to 2.50 percent, the first reduction in this rate since 2015.

Hong Kong’s Hang Seng index was the strongest performer in the region, up 1.4 percent, with a further worsening of civil unrest across the city appearing to have little impact. The Shanghai Composite index also posted a solid rise, up 0.6 percent, while Japan’s Nikkei and Topix indices advanced 0.5 percent and 0.2 percent respectively. Australia’s All Ordinaries index underperformed, closing down 0.4 percent.

Singapore's non-oil domestic exports fell 12.3 percent on the year in October after falling 8.1 percent in September. These exports have now fallen on the year for seven months in a row, broadly in line with other regional data showing weakness in trade flows associated with global trade disputes. Demand across Singapore's top ten trading partners in October mostly remained about as weak as it was in September or weakened further.

Looking forward

On Tuesday in Asia/Pacific, the following are scheduled: New Zealand CPI and Reserve Bank of Australia policy meeting minutes. In Europe, the following are due: Swiss merchandise trade and UK CBI industrial trends. In North America, data releases are Canadian manufacturing sales and US housing starts.

Global stock markets

 

Index

18 Nov 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

28036.22

31.33

0.1

 

NASDAQ

8549.94

9.11

0.1

 

S&P 500

3122.03

1.57

0.1

Canada

S&P/TSX Comp

17025.11

-3.36

0.0

Europe

 

 

 

 

UK

FTSE 100

7307.7

4.76

0.1

France

CAC

5929.79

-9.48

-0.2

Germany

XETRA DAX

13207.01

-34.74

-0.3

Italy

MIB

23463.98

-124.61

-0.5

Spain

Ibex 35

9258

-3.40

0.0

Sweden

OMX Stockholm 30

1745.17

-11.70

-0.7

Switzerland

SMI

10347.18

37.06

0.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6871.73

-27.20

-0.4

Japan

Nikkei 225

23416.76

113.44

0.5

 

Topix

1700.72

4.05

0.2

Hong Kong

Hang Seng

26681.09

354.43

1.4

S. Korea

Kospi

2160.69

-1.49

-0.1

Singapore

STI

3258.66

19.80

0.6

China

Shanghai Comp

2909.2

17.86

0.6

Taiwan

TAIEX

11599.78

74.18

0.6

India

Sensex 30

40284.19

-72.50

-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.