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On 21 March 2019 - Global stocks mixed as EU and UK leaders discuss Brexit delay

Anne D Picker

Anne D Picker - Econoday

Bank of England and Swiss National Bank leave policy rates on hold.

US markets

US stocks made strong gains Thursday, led by the tech sector. The Dow advanced 0.8 percent, the S&P rose 1.1 percent, and the Nasdaq increased 1.4 percent. Shares of semiconductors companies were among the strongest performers Thursday after chipmaker Micron reported solid quarterly earnings and analysts expressed confidence about the near-term outlook for chip sales. Apple also posted a large gain ahead of the expected release of new products in coming days.

Initial jobless claims data published Thursday covered the March 16 week, which will be the sample week for the March employment report. The data indicate that demand for labour remains strong and steady and suggest that payroll growth may rebound from the abrupt slowing seen in February. Claims fell 9,000 in the week while the 4-week average, compared to the sample week of the February employment report, fell a sizable 11,000, with no special factors having a material impact.

The Philadelphia Fed’s Business Outlook Survey showed a strong increase in its headline index from minus 4.1 in February to 13.7 in March, but some of the components suggest that conditions in the regional manufacturing sector remain challenging. The survey’s measure of new orders, in particular, improved but remains at low levels, while respondents also reported a sharp drop in their confidence about the 6-month outlook, offset by improved shipments and hiring. Other data published Thursday showed a small increase in the index of leading indicators in February and weaker growth in information sector revenue in the three months to December.

These data reflect observations at 4pm US ET. Gold advanced US$7.10 to US$1,308,80 while dated Brent spot crude fell US$0.80 to US$67.70. The US dollar made solid gains against the pound, the euro, and the Canadian dollar and moderate gains against other major currencies. The yield on the US Treasury 30-year bond fell 1 basis points to 2.96 percent while the 10-year note advanced 1 basis point to 2.54 percent.

European markets

European markets were mixed Thursday. The FTSE outperformed, up 0.9 percent, with weakness in the pound providing a boost to major exporters, while the CAC and the DAX fell 0.1 percent and 0.5 percent respectively. Deutsche Bank and Commerzbank both posted heavy falls Thursday. 

The pound and yields on UK government bonds both fell after the Bank of England left policy settings unchanged at its meeting Thursday, as expected, and also made no changes to its forward guidance. Its main policy rate remains at 0.7 percent, and officials’ judgement remains that a gradual and limited tightening of monetary policy will be appropriate to return inflation to the 2.0 percent target. Officials revised up their growth forecast for the three months to March from 0.2 percent to 0.3 percent and also noted that labour market conditions and cost pressures had been stronger than previously anticipated, but ongoing uncertainty about Brexit remains the main factor guiding policy decisions for the time being. 

UK retail sales data published shortly before the BoE’s policy decision was announced showed an increase in sales volumes of 0.4 percent in February, down from 0.9 percent in January, with year-on-year growth easing from 4.1 percent to 4.0 percent. The headline increase was driven by discretionary spending, with food sales down sharply and sales excluding food and fuel increasing 0.9 percent on the month after increasing 0.2 percent previously. 

The Swiss National Bank also left policy settings unchanged at its meeting Thursday. Although the domestic currency has been relatively stable since the SNB’s last meeting in December, officials still consider it to be “highly valued” and again signalled that they will intervene in foreign exchange markets to prevent any unwanted appreciation. Officials also revised down their inflation forecasts, from 0.5 percent to 0.3 percent in 2019 and from 1.0 percent to 0.6 percent in 2020 but left their 2019 growth forecast unchanged at 1.5 percent.

European Union leaders met in Brussels Thursday to discuss the United Kingdom’s request to delay its withdrawal. Reports suggest that the EU may approve a delay until just before European parliament elections take place on May 23 but only if the UK parliament approves the withdrawal deal agreed to between the EU and the UK government. The UK is scheduled to leave the EU next Friday, March 29.

Asia Pacific Markets

Stock markets were closed in Japan and India Thursday with most markets elsewhere in the region closing moderately higher. Hong Kong’s Hang Seng index was the exception to this trend, falling 0.9 percent on the day, with weakness in the tech sector making a large contribution to the headline decline. 

New Zealand's economy expanded 0.6 percent on the quarter in the three months to December, up from growth of 0.3 percent in the three months to September. Year-on-year growth slowed from 2.6 percent to 2.3 percent, its lowest level since late 2013. The increase in quarterly headline GDP growth in the three months to December reflects stronger growth in the services sector and a smaller contraction in the manufacturing sector, offset by weaker primary sector output. Officials at the Reserve Bank of New Zealand forecast growth to pick up in 2019, supported by accommodative monetary and fiscal policy. The RBNZ's next policy meeting is scheduled for later in the month.

Australian employment data showed conditions in the domestic labour market remain relatively strong but eased to some extent in February. The unemployment rate fell from 5.0 percent in January to 4.9 percent in February, its lowest level since June 2011, but this largely reflected a slip in the participation rate from 65.7 percent to 65.6 percent.

Payrolls increased by 4,600 persons after increasing 38,300 persons previously, with the growth driven by part-time employment. Despite the weaker growth in employment, officials at the Reserve Bank of Australia expect the unemployment rate to decline further over the medium-term resulting in a gradual pick-up in both wage growth and consumer inflation.

Looking forward

Japanese inflation data and the flash PMI survey for the Japanese manufacturing sector will be published shortly. Flash PMI surveys will also be published for key European economies and the US Friday, as well as Canadian CPI and retail sales data. The EU leaders summit will continue and conclude Friday.

Global Stock Markets

 

Index

Mar 21 2019

Daily Change

% Change Daily

North America

United States

Dow

25962.51

0.8

216.84

 

NASDAQ

7838.96

1.4

109.99

 

S&P 500

2854.88

1.1

30.65

Canada

S&P/TSX Comp

16244.59

0.5

77.03

Europe

UK

FTSE 100

7355.31

64.30

0.9

France

CAC

5378.85

-3.81

-0.1

Germany

XETRA DAX

11549.96

-53.93

-0.5

Italy

MIB

21373.06

42.85

0.2

Spain

Ibex 35

9355.6

-50.00

-0.5

Sweden

OMX Stockholm 30

1605.03

-0.96

-0.1

Switzerland

SMI

9454.05

-9.27

-0.1

Asia/Pacific

Australia

All Ordinaries

6253.49

1.72

0.0

Japan

Nikkei 225

*

*

*

 

Topix

*

*

*

Hong Kong

Hang Seng

29071.56

-249.41

-0.9

S. Korea

Kospi

2184.88

7.78

0.4

Singapore

STI

3213.65

5.99

0.2

China

Shanghai Comp

3101.45

10.81

0.3

Taiwan

TAIEX

10609.55

57.99

0.5

India

Sensex 30

*

*

*

Source: Haver Analytics

Note: all releases are listed in local time.

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