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On 22 January 2019 - Global stocks retreated — worries about fading growth dominated

Anne D Picker

Anne D Picker - Econoday

Investors continued to worry about China/US trade negotiations.

US markets

US stocks declined Tuesday following a prolonged weekend during which concerns about weak global growth reemerged on data from China and downgraded forecasts by the IMF while the US markets were closed in observance of the Martin Luther King Jr. Pessimism was additionally fueled by news reports Tuesday that said US officials turned down China’s offer of a preparatory meeting on trade negotiations because of a lack of progress on key issues such as forced technological transfers. Also not helping stocks was the continuing government shutdown and data released for December existing home sales, showing a decline of 6.4 percent on the month and 10.3 percent on the year, with bad news for buyers as supply fell to 3.7 months from 3.9 months previously as well as for sellers with a 1.4 percent drop in the median price.

The Dow declined 1.2 percent and the S&P500 fell 1.4 percent. NASDAQ declined 1.9 percent.

GE plunged on heavy volume that made it the most actively traded stock following news articles questioning the value of GE Capital Aviation Services and the probability of the contemplated sale of the unit to raise cash given the lack of interest from potential buyers.

With earnings season in full swing, Haliburton, Johnson & Johnson and Travelers each reported earnings and revenues that beat expectations but all nevertheless declined. Stanley Black & Decker plummeted following disappointing guidance for this year and auto and aerospace steel products maker Arconic fell sharply after it said it is no longer pursuing the sale of the company. Bucking the day’s downward pressure, Ebay advanced after activist hedge fund Elliot Management said it owns more than 4 percent of the company and sent a letter to its management outlining a plan leading to substantially higher valuation.

These data reflect observations at 4:00 PM US ET. Gold was up US$1.90 to US$1,284.50. Dated Brent spot crude was down US$1.27 to US$61.47. The US dollar was moderately weaker against the yen, the pound, and the Australian dollar and slightly stronger versus the euro, the yuan and the Canadian dollar. It was unchanged against the Swiss franc. The yield on the US Treasury 30 year bond was down 4 basis points to 3.06 percent while the 10 year note was down 4 basis points at 2.74 percent.

European markets

European stocks extended Monday’s decline, dragged down most by the banking sector led by UBS after the Swiss bank reported disappointing quarterly results. The DAX and CAC each fell 0.4 percent, while FTSE 100 fell 1.00 percent. Economic data released included the ECB Lending Survey, which showed loan demand continuing to grow briskly across all the main categories in the last quarter, especially in Germany, with little change in credit standards. But Germany’s ZEW survey of financial experts showed confidence in the current state of the German economy deteriorating for the fourth month in a row in the worst decline since 2014, though expectations for the next 6 months did show slight improvement. In the UK, data for December showed public sector finances slightly worse than expected, while the labour market report suggested that the economy is still creating enough new jobs to keep the unemployment rate historically low and maintain upside pressures on wages.

Swiss bank UBS fell sharply after reporting weaker than expected quarterly earnings and that clients withdrew US$8 billion in assets from its global wealth management unit and US$5 billion from asset management during the final months of last year.

In the UK, online financial trading company IG Group fell sharply after reporting lower earnings amid tighter regulation of high risk financial instruments for retail clients.

Telecom Italia declined to a new historical low following an analyst’s downgrade.

In Germany, Deutsche Bank declined along with other banks in the banking sector. Clothing fashion developer and marketer Hugo Boss advanced sharply after reporting sales acceleration in the last quarter and predicting further expansion this year.

Société Générale retreated, while Remy Cointreau advanced on stronger-than-expected revenues boosted by Chinese demand for the cognac maker.

Asia Pacific Markets

Asian stocks dipped lower Tuesday as investors turned more defensive following Monday’s release of Chinese data showing the smallest annual GDP increase (6.6 percent) in 28 years and IMF downgrades of global economic growth forecasts to 3.5 percent for this year and 3.6 percent for 2020.

The Nikkei fell 0.5 percent and the Topix 0.6 percent. Panasonic declined after sources said that Tesla has signed a preliminary contract with Chinese Tianjin Lishen to supply batteries for its new Shanghai factory in order to cut its reliance on Panasonic, currently Tesla’s exclusive battery supplier. Yaskawa Electric, Tokyo Electron and Fanuc retreated, while air conditioning manufacturer Totech rose sharply after it raised earnings guidance for the year by ¥400 million to ¥3.6 billion.

The Shanghai Composite declined 1.2 percent and the Hang Seng fell 0.7 percent. Energy companies CNOOC and China Petroleum & Chemical declined, while PetroChina fell sharply despite forecasting a 132 percent increase in 2018 net income after analysts wrote that this implied a fourth quarter earnings decline of up to 51 percent. Tencent fell after the China’s broadcasting regulator did not include any of the company’s titles on a list of new video games approved for release.

South Korea’s Kospi declined 0.3 percent. Samsung Electronics declined after it while automotive parts manufacturer Hyundai Mobis rose after the company reported US$1.7 billion in foreign orders for 2018 and targeted US$2.1 billion in 2019.

Australian All Ordinaries fell 0.5 percent. Mining company BHP Group declined after reporting a fall in iron ore production for the quarter and copper and iron ore operations disruptions costing $600 million. Boral and Westpac declined, while Dexus, Brambles, Gentrack and Breville advanced.  Woodside Petroleum and most energy stocks advanced, benefitting from higher oil prices.

Looking forward

The Bank of Japan will make its announcement Wednesday following its first meeting this year and is expected to leave its policy settings unchanged while it is likely to downgrade its inflation forecast for 2019 to around 1.5 percent. Japan also releases its merchandise trade balance data for December and its all industry index evaluating the monthly change in overall production by all sectors of the economy. Singapore releases December CPI data, France posts the business climate indicator for January and the UK releases January CBI industrial trends survey. Canada releases its retail sales data for November. The US releases the FHFA house price index for November and the January Richmond Fed manufacturing index.

Global Stock Markets

 

Index

22 Jan 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

24404.48

-301.87

-1.2

 

NASDAQ

7020.36

-136.87

-1.9

 

S&P 500

2632.90

-37.81

-1.4

Canada

S&P/TSX Comp

15233.76

-120.40

-0.8

Europe

 

 

 

 

UK

FTSE 100

6901.39

-69.20

-1.0

France

CAC

4847.53

-20.25

-0.4

Germany

XETRA DAX

11090.11

-46.09

-0.4

Italy

MIB

19437.27

-201.37

-1.0

Spain

Ibex 35

9037.50

-16.30

-0.2

Sweden

OMX Stockholm 30

1486.32

-7.44

-0.5

Switzerland

SMI

8966.34

-45.07

-0.5

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

5924.28

-29.25

-0.5

Japan

Nikkei 225

20622.91

-96.42

-0.5

 

Topix

1556.43

-9.94

-0.6

Hong Kong

Hang Seng

27005.45

-191.09

-0.7

S. Korea

Kospi

2117.77

-6.84

-0.3

Singapore

STI

3192.71

-27.85

-0.9

China

Shanghai Comp

2579.70

-30.81

-1.2

Taiwan

TAIEX

9894.66

5.26

0.1

India

Sensex 30

36444.64

-134.32

-0.4

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

Important Information

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