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On 19 September 2019 - US flat; Europe, Asia better after central bank news

Anne D Picker

Anne D Picker - Econoday

Buybacks lift Microsoft, US retailer Target.

US markets

US equities retreated from early highs to end flat Thursday, amid mixed macro news but with support from share buybacks. The Dow industrials eased 0.2 percent, the S&P 500 was unchanged, and the NASDAQ was up 0.1 percent.

On the positive side was an uptick in oil prices, along with news that European Commission President Jean-Claude Juncker said a Brexit deal with the UK is possible before the Oct. 31 deadline. On the negative side was a tweet from China’s influential Global Times editor, Hu Xijin, who said China is less anxious for a trade deal than the Trump administration believes.

Among sectors in the S&P 500, health care, materials, and technology outperformed while energy, industrials, and financials lagged. Among companies in focus, Microsoft (up 1.9 percent) and retailer Target (up 0.8 percent) both rose on news they would boost share buybacks. United States Steel dropped 11.2 percent after cutting its Q3 earnings outlook and saying steel prices are down as market conditions continue to deteriorate.

In US economic data, existing home sales continue to move higher, at a 5.490 million annual pace in August that beat Econoday's consensus range and edged out February as the best showing of the year. Meanwhile, strength is the signal from the Philadelphia Fed's manufacturing sample where September's headline index came in at a better-than-expected 12.0. New orders held steady in the mid-20s, at 25.8 which is very strong. But there was one signal of moderation in the Philadelphia report and that's the 6-month outlook which fell nearly 12 points to 20.8 which is a modest level for this reading.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil rose 94 cents to US$64.52, while gold rose by US$1.70 to US$1,505.00. The US dollar fell against most major currencies. The US Treasury 30-year bond yield fell 1 basis point to 2.24 percent while the 10-year note yield fell 1 basis point to 1.79 percent.

European markets

European equities gained Thursday, with banks leading as prospects for aggressive interest rate cuts faded following Wednesday's Federal Reserve policy announcement, and after the Bank of England and Swiss National Bank left rates unchanged. The Europe-wide STOXX 600, the German DAX, and the UK FTSE-100 were all up 0.6 percent, while the French CAC gained 0.7 percent.

Among shares in the Stoxx 600, outperformers, along with banks, included telecom, health care, and insurance while underperformers included food & beverage, basic resources, retail, and technology. European bank shares continue to be bolstered by supportive aspects of the ECB’s latest policy package. Spanish and Italian banks were leaders, with Spain’s Bankia up 7.9 percent, and Spain’s Banco Sabadell up 2.1 percent. Steel stocks in Europe fell in sympathy after United States Steel warned of an earnings shortfall in the current quarter. Luxembourg-based ArcelorMittal was off 4.4 percent and Germany’s Salzgitter declined 1.7 percent. Among companies reporting earnings, Next PLC, a UK fashion retailer, fell 5.7 percent on disappointing annual guidance. Clinigen, a UK pharma firm, rose 4.5 percent on an upbeat earnings and growth outlook. Richemont, the Swiss luxury goods retailer, rose 1.3 percent on positive results. In economic news, the Bank of England and the Swiss National Bank today opted to leave rates unchanged, as expected. In data, UK retailers matched market expectations in August. Following a slightly sharper revised 0.4 percent monthly advance in July, volume sales slipped 0.2 percent, reducing annual growth of purchases from 3.4 percent to 2.7 percent, a 3-month low.

Asia Pacific markets

Most major Asian markets closed higher Thursday after the Federal Reserve cut policy rates and the Bank of Japan indicated that additional policy easing could take place at their next policy meeting in late October. Australian and New Zealand data published Thursday also suggest officials in these two countries will retain and possibly add to policy accommodation in coming months. Japan’s Topix and Nikkei indices closed up 0.6 percent and 0.4 percent respectively, while the Shanghai Composite index and Australia’s All Ordinaries index both advanced 0.5 percent. Hong Kong’s Hang Seng index was the main regional outlier, falling 1.1 percent on the day. The Bank of Japan left policy settings on hold at the conclusion of its meeting Thursday, in line with expectations, but cautioned that downside risks to the global economy mean that "it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost”.  BoJ Governor Haruhiko Kuroda has in recent months promised that officials will act "without hesitation" to ease policy further if this momentum is "lost" and reaffirmed this commitment at his post-meeting press conference today. Although Governor Kuroda stressed that at present he does not consider this has happened, the BoJ is scheduled to update its economic forecasts ahead of its next policy meeting at the end of October and could conclude at that time that this momentum has been lost, in which case further policy easing would take place. Other data published Thursday showed Japan's All Industry Index rose 0.2 percent on the month in July, rebounding from a drop of 0.7 percent in June, with the components of the index broadly in line with previously released PMI manufacturing survey data.

Australian labour market data published Thursday showed a strong increase in part-time employment in August but a fall in full-time unemployment and a small increase in the unemployment rate from 5.2 percent to a 12-month high of 5.3 percent. This will likely reinforce the view of officials at the Reserve Bank of Australia that there remains significant spare capacity in the labour market and that the Australian economy can sustain a lower rate of unemployment without causing a spike in inflation. This assessment was a significant factor driving their decision to lower policy rates in recent months and Wednesday’s data likely boost the chances that a further rate reduction will be considered in coming months. New Zealand's economy expanded 0.5 percent on the quarter in the three months to June after growing 0.6 percent in the three months to March. Year-on-year growth moderated from 2.5 percent to 2.3 percent. Growth picked up in the services sector and primary industries but weakened in the manufacturing sector, while slightly stronger household consumption was offset by weaker investment, net exports, and government spending. After officials at the Reserve Bank of New Zealand cut policy rates by 50 basis points to a new record low of 1.00 percent their last meeting in August, the latest data suggest they will remain in favour of keeping monetary policy accommodative at their next policy meeting scheduled for next week.

Looking forward

On Friday in Asia/Pacific data, the Japanese CPI report is due. In European data, the Eurozone EC Consumer Confidence flash and German PPI reports are scheduled for release. In North American data, the Canadian retail sales figures are due. It will be a busy day for Fed appearances, with New York Fed President John Williams and Boston Fed President Eric Rosengren speaking in the US morning. Both are FOMC voting members during 2019.  Dallas Fed President Robert Kaplan, a non-voter, is speaking in the US afternoon.

Global stock markets

 

Index

19 Sep 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27094.79

-52.29

-0.2

 

NASDAQ

8182.88

5.49

0.1

 

S&P 500

3006.79

0.06

0.0

Canada

S&P/TSX Comp

16859.77

59.48

0.4

Europe

 

 

 

 

UK

FTSE 100

7356.42

42.37

0.6

France

CAC

5659.08

38.43

0.7

Germany

XETRA DAX

12457.7

68.08

0.6

Italy

MIB

22128.24

180.54

0.8

Spain

Ibex 35

9136

104.30

1.2

Sweden

OMX Stockholm 30

1664.64

9.53

0.6

Switzerland

SMI

10064.46

45.62

0.5

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6825.17

33.92

0.5

Japan

Nikkei 225

22044.45

83.74

0.4

 

Topix

1615.66

9.04

0.6

Hong Kong

Hang Seng

26468.95

-285.17

-1.1

S. Korea

Kospi

2080.35

9.62

0.5

Singapore

STI

3158.8

-8.04

-0.3

China

Shanghai Comp

2999.28

13.62

0.5

Taiwan

TAIEX

10894.7

-34.75

-0.3

India

Sensex 30

36093.47

-470.41

-1.3

*Markets closed

 

 

 

 

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.