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On 21 May 2019 - Global stocks rally as US temporarily postpones Huawei ban

Anne D Picker

Anne D Picker - Econoday

Consumer confidence up in Europe; existing home sales soft in the US.

US markets

A 90-day reprieve from the Trump administration for Huawei to buy US-made network gear marks an easing, however temporary, in trade tensions and helped give US shares a lift. The Dow rose 0.8 percent while the Nasdaq gained 1.1 percent.

Despite the US reprieve, which will give suppliers time to adjust to a final ban, Huawei's chief Ren Zhengfei underscored the strength of the company's 5G technology which he stressed is supported by a heavy existing inventory of chips.

Technology gainers in the session included Apple, Xilinx and Google parent Alphabet. Other movers included retail chains JC Penney and Kohl's which both fell sharply after posting quarterly earnings while auto-parts retailer AutoZone rose on earnings.

Economic data included an unexpected dip in existing home sales where the trend, nevertheless, is still improving. Existing home sales in fell a monthly 0.4 percent in April to a 5.190 million annual pace yet the 3-month average, which is a key reading for housing data, is still favorable at a 5.293 million rate for the best showing since September last year. Important details within the report were also favorable including a rise in both supply and prices. New home sales will be posted on Thursday and slight slowing from a strong March is the April consensus.

These data reflect observations at 4:00 PM US ET. Dated Brent spot crude was up US$0.16 to $72.19 while gold was US$2.90 lower at $1,274.40. The US dollar rose against the yen, the Swiss franc, the Australian dollar, and the pound; it was little changed against the euro and fell against the yuan and the Canadian dollar. The yield on the US Treasury 30-year bond rose 2 basis points to 2.85 percent while the yield on the 10-year note was up 1 basis point to 2.43 percent.

European markets

Reversing part of yesterday's sharp declines, European shares rallied Tuesday in line with Wall Street and despite losses in Asia. Both Germany's DAX and Italy's FTSE MIB rose 0.8 percent while France's CAC added 0.5 percent. In the UK, Theresa May said parliament will have "one last chance" to vote on her deal that has already been rejected repeatedly. The FTSE gained 0.2 percent on the day.

Chipmakers posted strong gains on news that the US is giving Huawei a 90-day window to continue doing business with suppliers. Austria's AMS and French-Italian chipmaker STMicroelectronics rallied while Austrian chipmaker AMS rose sharply.

Telecom Italia rallied on earnings and after confirming 3-year guidance, while Norsk Hydro of Norway rose sharply after Brazil okayed the reopening of its Alunorte alumina plant.

Eurozone data was headlined by consumer confidence which improved more than expected in May for its best showing so far this year. At a provisional minus 6.5, the index was 0.8 points higher than April's minus 7.3 to move further above its minus 10.7 long-run average.

But economic news out of the UK was soft as the latest CBI trends survey showed a surprisingly soft balance of orders, at minus 10 percent and 5 percentage points short of April's already subdued 2-1/2 year low. The export component for orders, at minus 16 percent after minus 5 percent, posted its worst mark in nearly three years. Brexit worries were reflected in stocks of finished goods which jumped to their highest level in 10 years to offer additional evidence that Brexit-related contingency planning is providing a temporary boost to GDP.

Asia Pacific Markets

Huawei's temporary reprieve from US sanctions supported Asian markets Tuesday, with the Shanghai composite rebounding by 1.2 percent, while Hong Kong, Japan, and Singapore ended lower but up from their worst levels on the day. Australian equities rose, with financials leading, on hopes for monetary policy easing, and as regulators relaxed mortgage lending rules. India's Sensex fell 1 percent on profit-taking following Monday's huge gains on exit polls showing Prime Minister Narendra Modi would return to power.

Hong Kong's Hang Seng closed down 0.5 percent. Better Huawei news helped, but traders also reacted to reported comments from Huawei's founder, who downplayed the temporary US action and said the firm was bracing for the ban to resume. In Singapore, the Straits Times index was down 0.7 percent on the Huawei worries, and on a soft GDP reading. Japan's Nikkei 225 was down 0.1 percent, as cyclical stocks, capital goods makers, and telecom suppliers were hurt by uncertainty over Huawei and wider concern about the US-China trade dispute. Korea's KOSPI rose 0.3 percent as Samsung rose 3 percent on hopes for better business at Huawei's expense.

Australia's All Ordinaries index gained 0.3 percent on comments from Reserve Bank of Australia Governor Philip Lowe who said the bank will consider rates as early as next month. Financials and homebuilders rallied, along with gold shares, but the trade worries limited the market's overall gains.

In Singapore, year-on-year growth in first-quarter GDP was revised down from an advance estimate of 1.3 percent to 1.2 percent, confirming a slowdown from the 1.9 percent year-on-year growth recorded in the three months to December.

Looking forward

Wednesday's data start off with machine orders and merchandise trade both out of Japan. The UK will post its CPI and PPI reports as well as public sector finances. Retail sales will be reported in Canada with US economic news led by minutes from the May FOMC meeting.

Global Stock Markets

 

Index

21 May 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

25877.33

197.43

0.8

 

NASDAQ

7785.72

83.34

1.1

 

S&P 500

2864.36

24.13

0.8

Canada

S&P/TSX Comp

16426.47

*

*

Europe

 

 

 

 

UK

FTSE 100

7328.92

18.04

0.2

France

CAC

5385.46

26.87

0.5

Germany

XETRA DAX

12143.47

102.18

0.8

Italy

MIB

20698.61

158.74

0.8

Spain

Ibex 35

9239.1

39.40

0.4

Sweden

OMX Stockholm 30

1602.91

14.01

0.9

Switzerland

SMI

9624.16

42.08

0.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6584.39

19.65

0.3

Japan

Nikkei 225

21272.45

-29.28

-0.1

 

Topix

1550.3

-4.62

-0.3

Hong Kong

Hang Seng

27657.24

-130.37

-0.5

S. Korea

Kospi

2061.25

5.54

0.3

Singapore

STI

3183.26

*

*

China

Shanghai Comp

2905.97

35.37

1.2

Taiwan

TAIEX

10464.5

66.09

0.6

India

Sensex 30

38969.8

-382.87

-1.0

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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