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On 21 August 2019 - US better, Europe up on political news; Asia flat to lower

Anne D Picker

Anne D Picker - Econoday

Markets await Friday comments from Fed’s Powell.

US markets

US stock indexes rose Wednesday led by technology and retail shares, but the market remained cautious ahead of expected comments from Federal Reserve Chair Jay Powell due Friday from the Fed’s Jackson Hole conference. The Dow industrials gained 0.9 percent, the S&P 500 rose 0.8 percent, and the NASDAQ was up 0.9 percent.

Consumer discretionary shares were up on positive retail earnings while networking equipment shares led tech stocks higher, with network hardware leader Cisco up 1.8 percent and Apple up 1.1 percent. Consumer staples and financials were the worst performers.

Among companies in focus, retailer Target Corporation rallied 21 percent after it reported Q2 earnings-per-share (EPS) of $1.82, vs. the $1.62 FactSet estimate, as revenues increased 3.6% year-over-year to $18.4 billion, beating the expected $18.3 billion. Home improvement retailer Lowe’s surged by 10 percent after it posted Q2 EPS of $2.14, compared to the expected $2.00, with revenues rising 0.5% year-on-year to $21.0 billion, just above the estimated $20.9 billion. Homebuilder Toll Brothers fell 4.4 percent despite announcing quarterly earnings of $1.00 per share vs. the expected $0.83.

Markets took a generally bullish view of minutes from the latest Federal Open Market Committee meeting which showed many risks facing the economy, a lack of clarity about when economic uncertainties would be resolved, and the need for policy flexibility.

In economic news, US home resales have been trending cautiously higher this year with July proving the best month since February, at a 5.420 million annual pace and a 0.6 percent year-on-year gain that is the first such gain since February last year. Single-family homes led the month rising to a 4.840 million rate and a 1.0 percent on-year gain to offset condos, which were steady at 580,000, the National Association of Realtors reported.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 26 cents to US$60.29, while gold fell US$3.10 to US$1,512.60. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield was up 3 basis points to 2.07 percent while the yield on the 10-year note rose 3 basis points to 1.58 percent.

European markets

European equities improved Wednesday on an improved political picture in Italy and hopes for German fiscal stimulus. The Europe-wide STOXX 600 rose 1.2 percent, the German DAX was up 1.3 percent, the French CAC gained 1.7 percent, and the UK FTSE 100 was up 1.1 percent.

In Italy, reports suggested better prospects for a market-friendly coalition between the Five Star Movement and its rival, the Democratic Party. Also supporting risk sentiment were reports that Germany may scale back its Solidarity Tax, a move that would boost the economy, and represent a more accommodative shift in the German fiscal stance. The news coincided with Germany’s first auction of zero-coupon 30-year bonds that technically failed, as it raised E824 million rather than the E2 billion it was supposed to raise.

Outperforming stock sectors included industrial goods and services, personal and household goods, and autos and parts. Underperformers included real estate, basic resources, and banks. UK engineering company Costain was a notable winner, up 11 percent on a bullish analyst recommendation despite disappointing earnings. On the downside, UK hotelier Hostelworld dropped 35 percent on news of terrible summer bookings. Auto stocks gained on reports that Renault and Fiat Chrysler are continuing merger discussions.

Asia Pacific markets

Major Asian markets were generally weaker or flat Wednesday, with declines in US stocks Tuesday weighing on sentiment. Guidance for trading was also limited by a bare regional data calendar and anticipation of possible news on the global policy outlook from the Federal Reserve’s conference later in the week. After making the biggest gains in the region Tuesday, Australia’s All Ordinaries index was the worst performer Wednesday, closing down 0.8 percent. Japan’s Nikkei and Topix indices also reversed course Wednesday after gains Tuesday, closing down 0.3 percent and 0.6 percent respectively. The Shanghai Composite index was flat on the day, while Hong Kong’s Hang Seng index advanced 0.1 percent.

Looking forward

On Thursday in Asia/Pacific, Japanese PMI composite flash and PMI manufacturing flash reports are due, plus Singapore CPI. In Europe, Eurozone PMI composite flash, Eurozone EC consumer confidence, French PMI composite flash, German PMI composite flash, and UK CBI Distributive Trades reports are scheduled, plus the ECB monetary policy council minutes. In North America, the following will be released: US jobless claims, the EIA natural gas report, and the Fed balance sheet report.

Global stock markets

 

Index

21 Aug 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26202.73

240.29

0.9

 

NASDAQ

8020.21

71.65

0.9

 

S&P 500

2924.43

23.92

0.8

Canada

S&P/TSX Comp

16309.23

95.92

0.6

Europe

 

 

 

 

UK

FTSE 100

7203.97

78.97

1.1

France

CAC

5435.48

90.84

1.7

Germany

XETRA DAX

11802.85

151.67

1.3

Italy

MIB

20847.07

361.64

1.8

Spain

Ibex 35

8701.5

83.20

1.0

Sweden

OMX Stockholm 30

1543.47

9.13

0.6

Switzerland

SMI

9848.11

77.72

0.8

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6572.57

-54.80

-0.8

Japan

Nikkei 225

20618.57

-58.65

-0.3

 

Topix

1497.51

-9.26

-0.6

Hong Kong

Hang Seng

26270.04

38.50

0.1

S. Korea

Kospi

1964.65

4.40

0.2

Singapore

STI

3122.57

-13.38

-0.4

China

Shanghai Comp

2880.33

0.33

0.0

Taiwan

TAIEX

10525.8

3.30

0.0

India

Sensex 30

37060.37

-267.64

-0.7

Note: all releases are listed in local time.

Important Information

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