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On 20 November 2019 - US, Europe, Asia off on US-China trade worries

Anne D Picker

Anne D Picker - Econoday

Mostly upbeat retailer stock results support US stocks.

US markets

US equities fell Wednesday on renewed concern that the US and China may fail to reach an interim trade accord, or that any trade deal may be delayed. The Dow industrial average fell 0.4 percent, the S&P 500 declined 0.4 percent, and the NASDAQ was off 0.5 percent.

Reuters reported that US officials say a phase-one trade deal may be delayed until 2020 as China is pushing for more tariff concessions and the US has added demands as well. Fallout from the Hong Kong protests added to prospects for worsening US-China relations, and reduced prospects for a trade truce. Bloomberg reported the trade talks were progressing, but had reached a make-or-break stage. On the positive side, Commerce Secretary Wilbur Ross said officials remained optimistic a deal will be concluded soon.

More positive retailer earnings helped support the markets, with department store Target up 14 percent after an earnings beat, and home improvement store Lowe’s up 3.9 percent on an upside earnings surprise and better guidance. Retailer Urban Outfitters, on the other hand, dropped 15.3 percent on news of a terrible sales quarter. Oil stocks rebounded from recent losses as oil prices rose on news of a smaller-than-expected rise in US oil inventories.

Among other sectors, communication services was the worst performer, with telecom stocks hit hardest as AT&T fell 2.2 percent on analyst downgrades. Airlines led industrials lower. Shopping center REITs fell on a report in the Wall Street Journal saying investor Carl Icahn was shorting the sector on expectations for weakening store sales. On the positive side, health care stocks outperformed, with biotech leading.

In US economic news, crude oil inventories rose 1.4 million barrels in the November 15 week to 450.4 million, 0.8 percent above their level last year at this time. The crude oil build was much smaller than the increase of 5.9 million reported Tuesday by the American Petroleum Institute, a private industry group, which also reported a build of 3.4 million barrels for gasoline and a draw of 2.2 million barrels for distillates.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.56 to US$62.48, while gold rose by 50 cents to US$1,473.20. The US dollar rose against most major currencies. US Treasury 30-year bond yield fell 5 basis points to 2.20 percent, and the US 10-year note yield fell 4 basis points to 1.74 percent.

European markets

Major European equities indexes weakened Wednesday amid worries over prospects for a US-China trade deal. The Europe-wide STOXX 600 declined 0.4 percent, the German DAX fell 0.5 percent, the French CAC eased by 0.3 percent, and the UK FTSE-100 declined 0.8 percent.

Markets reacted poorly to a Reuters report that an interim trade pact may be delayed, and to China’s threat to retaliate after the US Congress approved a law that compels US authorities to sanction China over human rights violations in Hong Kong. President Trump’s Tuesday threat to raise tariffs added to concerns.

Trade-sensitive sectors including autos and miners were hit hard. Other underperformers included travel & leisure, real estate, financial services, and media. Outperformers included telecom, utilities, and technology. Travel stocks suffered as UK airport and train food company SSP Group fell 3.5 percent after cutting its full-year guidance.

Asia Pacific markets

Major Asian markets sold off Wednesday after President Trump warned late Tuesday that he would raise tariffs further if the United States and China fail to secure a trade deal. Weak Japanese trade data also weighed on investor sentiment, offsetting the impact of a small reduction in lending rates by Chinese authorities. As they did in September and October, officials at the People’s Bank of China lowered the one-year loan prime rate by five basis points, taking the rate to 4.15 percent.

Australia’s All Ordinaries index was among the weakest performers in the region, closing down 1.2 percent, with shares of major banks down sharply after financial regulators accused local bank Westpac of serious breaches of anti-laundering and terrorism finance laws. The Shanghai Composite index and Hong Kong’s Hang Seng index both dropped 0.8 percent, while Japan’s Nikkei and Topix indices fell 0.6 percent and 0.3 percent respectively.

Japanese trade data published Wednesday showed a swing from a slightly revised deficit of Y124.8 billion in September to a small surplus of Y17.3 billion in October, well short of the consensus forecast for a surplus of Y335 billion. Exports fell 9.2 percent on the year in October after dropping 5.2 percent in September, with weakness again broad-based across major trading partners, including China and the United States. This year-on-year decline is the eleventh in a row and is broadly in line with previously released Chinese and Singaporean data. Imports fell 14.8 percent on the year after dropping 1.5 percent previously, with this sharper decline largely driven by weaker petroleum imports.

Looking forward

On Thursday in Asia/Pacific, Singapore GDP is scheduled. In Europe, French business climate indicator, and UK public sector finance, ECB monetary policy meeting minutes, and Eurozone EC consumer confidence are due. In North America, releases are scheduled for the following: US jobless claims, Philadelphia Fed Business Outlook Survey, existing home sales, and EIA Natural Gas report.

Global stock markets

 

Index

20 Nov 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27821.09

-112.93

-0.4

 

NASDAQ

8526.73

-43.93

-0.5

 

S&P 500

3108.46

-11.72

-0.4

Canada

S&P/TSX Comp

17005.82

-5.58

0.0

Europe

 

 

 

 

UK

FTSE 100

7262.49

-61.31

-0.8

France

CAC

5894.03

-15.02

-0.3

Germany

XETRA DAX

13158.14

-62.98

-0.5

Italy

MIB

23351.78

22.57

0.1

Spain

Ibex 35

9225.4

-33.80

-0.4

Sweden

OMX Stockholm 30

1729.06

-14.19

-0.8

Switzerland

SMI

10385.74

19.72

0.2

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6828.25

-85.84

-1.3

Japan

Nikkei 225

23148.57

-144.08

-0.6

 

Topix

1691.11

-5.62

-0.3

Hong Kong

Hang Seng

26889.61

-204.19

-0.8

S. Korea

Kospi

2125.32

-27.92

-1.3

Singapore

STI

3229.78

-9.09

-0.3

China

Shanghai Comp

2911.05

-22.94

-0.8

Taiwan

TAIEX

11631.2

-25.20

-0.2

India

Sensex 30

40651.64

181.94

0.4

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.