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On 17 January 2020 - US firms as uptrend continues; Europe gains on trade hopes; Asia flat

Anne D Picker

Anne D Picker - Econoday

Strong US and Chinese economic reports offer support

US markets

US equities firmed Friday –- though ending well off the day’s highs -- as the market uptrend and the bullish narrative remained intact, with support from strong US and Chinese economic data, and signs of cooling in trade tensions.  The Dow industrials rose 0.2 percent, the S&P 500 gained 0.4 percent, and the NASDAQ was up 0.3 percent.

Upbeat US housing starts and Chinese industrial production figures Friday underpinned perceptions that the global economy remains resilient. Positive comments from the EU trade commissioner soothed worries about US-Europe trade tensions following the signing of an interim US-China trade pact this week.

Among sectors, communications services outperformed as Google rose 2.0 percent on a price target upgrade at UBS. Meanwhile, financials showed strength with banks up on robust earnings from regional banks Citizens Financial, up 3.3 percent, and First Horizon National, up 4.3 percent. Consumer discretionary stocks outperformed, led by fast-food restaurants. Lagging were industrials, with weakness in transport and logistics. Health care was off, and energy lagged the most.

Among companies in the news, CSX, the railroad, was off 0.5 percent after in-line results but a gloomy report on business conditions. JB Hunt, the trucker, dropped 4.2 percent on an earnings miss and bearish guidance. Expeditors International, the logistics company, also fell 5.6 percent after warning its Q4 results would miss expectations.

In US economic news, housing starts in December surged a monthly 16.9 percent to a 1.608 million annual rate while building permits, though dipping 3.9 percent in the month, came in at 1.416 million. In a separate report, industrial production fell an as-expected 0.3 percent in December following a downwardly revised but still outsized gain of 0.8 percent in November.  And finally, consumer sentiment held nearly steady in the preliminary reading for January, at 99.1 versus December's 99.3.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil rose 39 cents to US$65.00, while gold rose US$5.50 to US$1558.50. The US dollar gained against most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 2.29 percent while the 10-year note yield rose 2 basis points to 1.83 percent.

European markets

Positive comments on the US-European trade dispute from a top European trade official lifted equities Friday. The Europe-wide STOXX 600 rose 1.0 percent, the German DAX gained 0.7 percent, the French CAC rose 1.0 percent, and the UK FTSE-100 was up 0.9 percent.

Markets focused on EU Trade Commissioner Phil Hogan’s comment that trade talks were off to a good start, and the EU is ready to negotiate on the issue of subsidies to Airbus and other disputes. On the other hand, Hogan also appeared to downplay the significance of the US-China trade pact, in comments sure to rankle US officials. Separately, in another market positive, traders viewed Friday’s upbeat Chinese industrial production and investment figures as signaling resilience in the global macroeconomy.

Among sectors, basic resources, utilities, health care, and technology outperformed, while oil & gas, travel & leisure, and banks lagged.

In economic news, UK retail sales were surprisingly weak in December. A 0.6 percent monthly fall followed a steeper revised 0.8 percent drop in November and left volumes at their lowest level since December 2018. This was the fourth decrease in the last five months but an even weaker period a year ago still saw annual growth edge up from 0.8 percent to 0.9 percent.

Asia Pacific markets

Major Asian markets closed Friday little changed on the day but posted mixed results on the week. Chinese data published Friday were broadly in line with expectations, showing improvement in some indicators and stability in others. The data also confirmed weaker annual growth in 2019, largely reflecting the impact of China’s trade dispute with the United States over the year. The Shanghai Composite index was flat on the day and closed the week down 0.5 percent, while Hong Kong’s Hang Seng index rose 0.6 on the day and 1.5 percent on the week. Japan’s Nikkei and Topix indices closed up 0.5 percent and 0.4 percent respectively on the day and advanced 0.8 percent and was unchanged respectively on the week. Australia’s All Ordinaries index advanced 0.3 percent on the day and outperformed with a 2.0 percent gain on the week.

Chinese quarterly GDP and monthly activity data were the highlight of the regional calendar Friday. China's economy expanded 6.0 percent on the year in the three months to December, unchanged from the pace recorded in the three months to September, and just above the consensus forecast of 5.9 percent. GDP grew 1.5 percent on the quarter, also unchanged from the increase recorded previously. In annual terms, China's GDP grew 6.1 percent in 2019, down from 6.6 percent in 2018 and at the lower end of the government's 6.0 to 6.5 percent growth target range for the year. Speaking after the release of the data, officials argued that counter-cyclical fiscal policy during 2019 had helped the economy to meet the growth target and noted that there remains scope for policy to provide further support to the economy in 2020. Nevertheless, officials also said that the goal of policy would be to improve the "quality and effectiveness" of growth rather than targeting a high growth rate.  

Monthly Chinese data also published today showed stronger growth in industrial production and fixed asset investment and steady growth in retail sales in December. Industrial production advanced 6.9 percent on the year in December, accelerating from growth of 6.2 percent in November and well above the consensus forecast of 5.9 percent, mainly reflecting stronger growth in the manufacturing sector. Retail sales grew 8.0 percent on the year, unchanged from previously and just above the consensus forecast of 7.8 percent, while fixed asset investment grew 5.4 percent year-to-date, up from 5.2 percent previously and just above the consensus forecast of 5.2 percent.

Singapore's non-oil domestic exports increased 2.4 percent on the year in December after falling 5.9 percent in November. This is the first increase in these exports in nine months and was mainly driven by a rebound in non-electronics exports. The year-on-year increase in headline exports growth was largely driven by improved demand from major markets, including China, Japan, the United States and the European Union. Total imports fell 2.3 percent on the year after falling 5.8 percent previously.

Looking forward

Central Bank activities

Jan-20

Japan

BOJ Policy Announcement

Jan-22

Canada

BoC Policy Announcement and Report

Jan-23

Eurozone

ECB Policy Announcement and Press Conference

Jan-24

Japan

BOJ MPB Minutes

 

 

 

The following indicators will be released this week...

Europe

 

 

Jan-20

Germany

PPI (December)

Jan-21

UK

Labor Market Report (December)

 

Germany

ZEW Survey (December)

Jan-22

France

Business Climate Indicator (January)

 

UK

CBI Industrial Trends (January)

 

 

Public Sector Finances (December)

Jan-23

Eurozone

EC Consumer Confidence Flash (January)

Jan-24

Eurozone

PMI Composite Flash (January)

 

France

PMI Composite Flash (January)

 

Germany

PMI Composite Flash (January)

 

UK

CIPS/PMI Composite Flash (December)

Asia Pacific

Jan-23

Australia

Labor Force Survey (December)

 

Japan

Merchandise Trade (December)

 

Singapore

CPI (December)

Jan-24

Japan

CPI (December)

 

 

PMI Composite Flash (January)

 

 

PMI Manufacturing Index Flash (January)

 

New Zealand

CPI (Q4)

 

Singapore

Industrial Production (December)

Americas

 

 

Jan-21

Canada

Manufacturing Sales (November)

Jan-22

Canada

CPI (December)

 

US

Existing Home Sales (December)

Jan-23

US

Jobless Claims (Week of Jan. 18)

 

 

Leading Indicators (December)

Jan-24

Canada

Retail Sales (November)

 

US

PMI Composite Flash (January)

Global stock markets

 

Index

17 Jan 2020

Daily Change

% Change Daily

North America

United States

Dow

29348.1

50.46

0.2

 

NASDAQ

9388.95

31.82

0.3

 

S&P 500

3329.62

12.81

0.4

Canada

S&P/TSX Comp

17559.02

74.25

0.4

Europe

UK

FTSE 100

7674.56

64.75

0.9

France

CAC

6100.72

61.69

1.0

Germany

XETRA DAX

13526.13

96.70

0.7

Italy

MIB

24141.07

200.66

0.8

Spain

Ibex 35

9681.3

108.80

1.1

Sweden

OMX Stockholm 30

1825.94

13.64

0.8

Switzerland

SMI

10841.82

148.30

1.4

Asia/Pacific

Australia

All Ordinaries

7180.29

21.65

0.3

Japan

Nikkei 225

24041.26

108.13

0.5

 

Topix

1735.44

6.72

0.4

Hong Kong

Hang Seng

29056.42

173.38

0.6

S. Korea

Kospi

2250.57

2.52

0.1

Singapore

STI

3281.03

3.03

0.1

China

Shanghai Comp

3075.5

1.42

0.0

Taiwan

TAIEX

12090.29

23.36

0.2

India

Sensex 30

41945.37

12.81

0.0

Note: all releases are listed in local time.

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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.