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On 19 February 2019 - Global stocks little changed as ECB and BoJ hint at more policy support

Anne D Picker

Anne D Picker - Econoday

Markets flat as investors wait and watch.

US markets

US stocks were little changed Tuesday after Monday’s holiday, with the US data calendar light and political developments providing little new information to investors. Relative to Friday’s closing level, the Dow closed fractionally higher on Tuesday with an 8.07 point gain, with the S&P up 0.1 percent and the Nasdaq up 0.2 percent. 

Walmart was among the stronger performers Tuesday after reporting strong holiday sales in the three months to January. Sales rose 4.2 percent on the year over this period, beating expectations, with solid growth across most major categories. The retailer also advised that the impact of the government shutdown in January helped sales growth as the federal government front-loaded some food aid payments to recipients. Adjusted profits were US$1.41 per share, above analysts’ expectations of US$1.33 per share. 

US-China trade talks resumed in Washington Tuesday after both parties noted progress in talks held last week in Beijing. Few details have been made public about the terms of any likely agreement. US tariffs on Chinese imports are scheduled to increase from 10 percent to 25 percent at the start of March, but President Trump again indicated he may delay this increase and possibly meet with President Xi sometime next month to finalise an agreement.

The National Association of Home Builders’ housing market index increased from 58 in January to 62 in February, reflecting improvements in the survey’s measures of house sales and buyer traffic. Conditions remained stronger in the West and South of the country, with the Midwest improving and the Northeast weakening slightly.

These data reflect observations at 4:00 PM US ET. Gold posted strong gains, closing up US$21.90 to US$1,344.00 while dated Brent spot crude fell US$0.03 to US$66.47 The US dollar fell against the pound and the Australian dollar Tuesday but moves against other major currencies were limited. The yield on the US Treasury 30 year bond fell 1 basis points to 2.98 percent while the 10 year note fell 2 basis points to 2.64 percent.

European markets

Price action in European markets was limited on Monday with US markets closed for the holiday and the regional data calendar bare, with major European indices then mixed on Tuesday. The FTSE closed down 0.6 percent on the day, with the CAC losing 0.2 percent, and the DAX advancing 0.1 percent. The pound made solid gains after positive labour market data and ahead of further Brexit negotiations this week between the United Kingdom government and the European Union.

Senior officials at the European Central bank have continued to indicate that additional policy support may be considered in response to the recent slowdown in Eurozone growth. ECB Chief Economist Peter Praet told reporters Monday that officials will likely lower their 2019 growth and inflation forecasts ahead of next month’s policy meeting, citing the impact of trade tensions and Brexit uncertainty. He noted that this may prompt a change in the ECB’s forward guidance on the trajectory of policy rates, which currently indicates that rates will remain on hold in the near-term.

UK labour market data published Tuesday showed conditions remained robust at the start of the year, despite ongoing Brexit uncertainty. Measures of unemployment remained steady in January, with the claimant count measure unchanged at 2.8 percent and the ILO survey measures unchanged at 4.0 percent, while further gains in job vacancies suggest skill shortages remain an issue in some sectors. Average earnings growth was steady at 3.4 percent on the year in January, but in real terms earnings advanced 1.3 percent, the strongest growth in two years.  

The German ZEW survey showed a sharp deterioration in respondents’ assessment of current conditions, with this measure falling from 27.6 in January to 15.0 in February. This was the fifth consecutive decline in this measure and takes it to its lowest level since December 2014. Respondents have continued to indicate slightly less pessimism about the outlook, with the measure of future expectations picking up from minus 15.0 to minus 13.4. 

Asia Pacific Markets

Most Asian markets closed higher Monday, taking the lead from gains in New York on Friday. However, with US markets closed Monday and providing no direction for investor sentiment, Asian markets were generally little changed on Tuesday. Hong Kong’s Hang Seng index and India’s Sensex index recorded the biggest moves Tuesday, both closing down 0.4 percent on the day.

The fall in the Hang Seng partly reflected a drop in the Hong Kong listed branch of HSBC after the bank reported 2018 profits of US$19.80 billion, falling short of analysts’ expectations of US$21.41 billion. Executives expressed concerns about slower Chinese growth, global trade tensions, and Brexit preparations but also advised that revenues in January had been better than expected.

UK-Australian miner BHP closed slightly higher Tuesday after it reported underlying profits of US$4.03 billion for the second half of 2018, below analysts’ expectations of US$4.21 billion. Operational disruptions impacted over this production, while weaker Chinese growth and global commodity prices also weighed on performance. The recent surge in iron ore prices, however, is expected to support performance in 2019.   

The yen sold off moderately Tuesday after comments from Bank of Japan Governor Haruhiko Kuroda on the impact of the currency on the economy. Speaking to legislators, Governor Kuroda noted that officials would consider this impact when setting policy and would ease policy further if they judged this to be necessary to achieve their 2.0 percent inflation target.

The minutes of the Reserve Bank of Australia’s February meeting, published Tuesday, provided more details about the shift in officials’ assessment of the policy outlook that RBA Governor Philip Lower had announced in a speech earlier this month shortly after the meeting. Throughout most of 2018, the minutes of RBA meetings had shown that officials did not expect to change policy rates in the near-term but also considered that the next move would more likely be an increase than a decrease. The February minutes, however, note that officials now consider downside risks to have increased, prompting them to revise their growth and inflation forecasts lower. Reflecting shift, officials now consider that the chances of the next move in policy rates being higher or lower are now "more evenly balanced".

Looking forward

Japanese trade data for January will be published shortly. The European data calendar is relatively light Wednesday, with the FOMC minutes for the January meeting the main focus of the US data calendar.

Global Stock Markets

 

Index

Feb 19 2019

Daily Change

% Change Daily

North America

United States

Dow

25891.32

8.07

0.0

 

NASDAQ

7486.77

14.36

0.2

 

S&P 500

2779.76

4.16

0.1

Canada

S&P/TSX Comp

15937.44

99.20

0.6

Europe

UK

FTSE 100

7179.17

-40.30

-0.6

France

CAC

5160.52

-8.02

-0.2

Germany

XETRA DAX

11309.21

10.01

0.1

Italy

MIB

20228.19

-101.64

-0.5

Spain

Ibex 35

9136.40

-19.10

-0.2

Sweden

OMX Stockholm 30

1587.22

3.36

0.2

Switzerland

SMI

9256.17

-11.29

-0.1

Asia/Pacific

Australia

All Ordinaries

6184.20

13.50

0.2

Japan

Nikkei 225

21302.65

20.80

0.1

 

Topix

1606.52

4.56

0.3

Hong Kong

Hang Seng

28228.13

-118.88

-0.4

S. Korea

Kospi

2205.63

-5.26

-0.2

Singapore

STI

3259.80

-6.17

-0.2

China

Shanghai Comp

2755.65

1.29

0.1

Taiwan

TAIEX

10152.26

6.98

0.1

India

Sensex 30

35352.61

-145.83

-0.4

Source: Haver Analytics

Note: all releases are listed in local time.

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