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On 19 December 2019 - US firms on company news; Europe mixed; Asia off

Anne D Picker

Anne D Picker - Econoday

Corporate earnings, hopeful US-China trade comments support US market.

US markets

US equities rose Thursday on some upbeat corporate earnings, and on positive comments on the pending US-China trade pact from US Treasury Secretary Steven Mnuchin, and from China’s Ministry of Commerce. The Dow industrials rose 0.5 percent, the S&P 500 was up 0.4 percent, and the NASDAQ gained 0.7 percent.

Among sectors, media, entertainment, hospitals and airlines were among the leaders, with machinery, medical distributors, restaurants, and homebuilders lagging. Among companies in focus, Micron Technology, the chipmaker, rose 1.2 percent after beating earnings and revenue expectations, and on a statement that its business is bottoming out after a bad period. Rite Aid, the drug store chain, soared 42 percent on a huge earnings beat and upward guidance.

In US economic news, initial jobless claims fell back 18,000 in the December 14 week to a 234,000 level that nevertheless is slightly higher than the mid-month November week in what is a modestly unfavorable sample-week to sample-week comparison for the December employment report. In other data, the Philadelphia Fed December report came in at only plus 0.3 percent for the lowest reading since June and among the lowest of the last three years. Yet the details of the report were very strong especially new orders and backlogs. Also released were existing homes which fell 1.7 percent in November to a 5.450 million annual rate that missed Econoday's consensus range. Resales are up only 2.7 percent from November last year, which compares with a more than 30 percent October gain for new home sales.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 29 cents to US$66.46, while gold was up $3.50 at US$1,483.20. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield declined 1 basis point to 2.35 percent while the 10-year note yield fell 1 basis point to 1.91 percent.

European markets

Major European equities were mixed Thursday in quiet trading as markets focused on central bank policy news, including the Bank of England decision to leave policy steady. The Europe-wide STOXX 600 rose 0.2 percent, the German DAX eased 0.1 percent, the French CAC rose 0.2 percent, and the UK FTSE-100 rose 0.4 percent.

In other central bank news, the Swedish Riksbank raised rates, to end its experiment with negative interest rates, while the Norges Bank kept rates steady, in a pause from its tightening cycle.

UK markets outperformed, with exporters and multinationals leading, as sterling fell on renewed worries about a disorderly Brexit. Unilever rose 1.3 percent and AstraZeneca gained 2.1 percent were among the leaders as sterling fell. Both companies bill heavily in dollars and other non-sterling currencies. Among stock sectors across Europe, health care, oil & gas, and real estate outperformed, while autos & parts, construction & materials, and insurance lagged.

In economic news, UK retailers had a surprisingly poor November. Volumes sales fell 0.6 percent on the month, their third decline in the last four months and the steepest since last December. October's dip was revised away but annual growth still slowed from 3.1 percent to just 1.0 percent, the weakest rate since April 2018. Separately, French manufacturing sentiment was unchanged at year-end but at an improved level following an upward revision to November. A headline print of 102 was stronger than market expectations but following a number of revisions to the back data, in line with the generally flat trend seen since the middle of the year.

Asia Pacific markets

Most major Asian markets closed lower Tuesday, but declines were modest, with external developments and incoming regional data doing little to shift investor sentiment. Japan’s Nikkei and Topix indices closed down 0.3 percent and 0.1 percent respectively, Hong Kong’s Hang Seng index fell 0.3 percent, and Australia’s All Ordinaries index dropped 0.2 percent. The Shanghai Composite index was flat on the day.

The Bank of Japan's Monetary Policy Board left monetary policy settings unchanged at the conclusion of its December meeting, in line with consensus forecasts. As it has been since early 2016, the BoJ's short-term policy rate for excess reserves remains at minus 0.1 percent while the target level for the long-term 10-year yield remains at around zero percent. Officials also retained the forward policy guidance, reaffirming their commitment to keeping policy rates at or below current levels for "as long as it is necessary to pay close attention to the possibility that the momentum toward achieving the price stability target will be lost". The statement accompanying the decision further advised that officials will not hesitate to ease policy further if they conclude that there is a "greater possibility" that this momentum will be lost.

Australia's labor market saw an increase of 39,900 in the number of employed in November, rebounding sharply from a decline of 19,000 in October, and well above the consensus forecast for an increase of 18,000. The unemployment rate fell from 5.3 percent in October to 5.2 percent in November, just below the consensus forecast of 5.3 percent, while the participation rate was unchanged at 66.0 percent just below the consensus forecast of 66.1 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, an assessment that has driven their decision to lower policy rates in recent months and likely supports the chances of more policy easing in coming months.

New Zealand's economy expanded 0.7 percent on the quarter in the three months to September, picking up strongly from downwardly revised growth of just 0.1 percent in the three months to June. Growth in household consumption accelerated from 0.3 percent to 0.8 percent, while investment spending also strengthened sharply, up 6.3 percent after increasing 1.8 percent previously. Officials at the Reserve Bank of New Zealand expect growth to pick ups in 2020 but the latest data suggest that recent policy rate cuts may have already provided some support to domestic activity. Also published today, trade data showed New Zealand's merchandise trade deficit narrowed from a revised NZ$1,039 million in October to NZ$753 million in November. Growth in both exports and imports improved in November, but to a greater extent for exports.

Looking forward

On Friday in Asia/Pacific, Japanese CPI figures are due. In Europe, German Gfk consumer climate, French consumer manufactured goods, French PPI, Italian business and consumer confidence, UK public sector finances, UK GDP, and Eurozone EC consumer confidence releases are scheduled. In North America, Canadian retail sales, US GDP, US personal income and outlays, and US consumer sentiment reports are scheduled.

Global stock markets

 

Index

19 Dec 2019

Daily Change

% Change Daily

North America

United States

Dow

28376.96

137.68

0.5

 

NASDAQ

8887.22

59.49

0.7

 

S&P 500

3205.37

14.23

0.4

Canada

S&P/TSX Comp

17064.04

32.06

0.2

Europe

UK

FTSE 100

7573.82

33.07

0.4

France

CAC

5972.28

12.68

0.2

Germany

XETRA DAX

13211.96

-10.20

-0.1

Italy

MIB

23708.94

80.07

0.3

Spain

Ibex 35

9617.2

-4.60

0.0

Sweden

OMX Stockholm 30

1783.29

-4.67

-0.3

Switzerland

SMI

10575.15

18.41

0.2

Asia/Pacific

Australia

All Ordinaries

6942.56

-14.44

-0.2

Japan

Nikkei 225

23864.85

-69.58

-0.3

 

Topix

1736.11

-2.29

-0.1

Hong Kong

Hang Seng

27800.49

-83.72

-0.3

S. Korea

Kospi

2196.56

1.80

0.1

Singapore

STI

3207.42

-2.12

-0.1

China

Shanghai Comp

3017.07

0.03

0.0

Taiwan

TAIEX

12018.9

-103.55

-0.9

India

Sensex 30

41673.92

115.35

0.3

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.