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On 20 September 2019 - US off on US-China trade worries; Europe mixed, Asia flat

Anne D Picker

Anne D Picker - Econoday

Market rattled after Chinese delegation cancels trip to US farm states.

US markets

US equities slipped Friday after some unpleasant US-China trade headlines, and comments from Federal Reserve officials. The Dow industrials declined 0.6 percent, the S&P 500 fell 0.5 percent, and the NASDAQ was down 0.8 percent.

Markets reacted badly to news that a delegation of Chinese agriculture officials had cancelled a trip to Montana and other farm states. Meanwhile, President Trump said he wants a full-blown trade pact with China, not just a small deal involving a purchase of US farm goods. Separately, Dallas Fed President Robert Kaplan, a non-voter this year, said he has penciled in no more rate cuts in 2019, while Boston Fed President Eric Rosengren, who voted against the rate cut this week, argued that the economy is doing fine, and rate cuts are unwise.

Among sectors in the S&P 500, consumer discretionary, technology, and communications services underperformed, while defensive sectors health care, utilities, consumer staples, and energy did better. Among companies in focus, chipmaker Texas Instruments declined 1.8 percent after raising its quarterly dividend. Xilinx, another chipmaker, fell 6.9 percent on news its CFO is stepping down. Big pharma Merck rose 1.4 percent on FDA approval for its anti-virus drug. And Netflix dropped 5.6 percent after its CEO cited concern over competition from other streaming video services, including Walt Disney and Apple.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 9 cents to US$64.61, while gold jumped by US$18.50 to US$1,523.50. The US dollar rose against most major currencies but fell against the Japanese yen. The US Treasury 30-year bond yield fell 7 basis points to 2.17 percent while the 10-year note yield was down 6 basis points to 1.72 percent.

European markets

European equities ended narrowly mixed Friday, with support from pharmaceuticals, oil, and bank stocks, and UK markets weaker on confusing Brexit news. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX edged up 0.1 percent, the French CAC rose 0.6 percent, and the UK FTSE-100 declined 0.2 percent.

UK markets were hurt by a report Prime Minister Boris Johnson had conceded no Brexit deal is likely before Oct. 31, which followed a more hopeful report that European Commission President Jean-Claude Juncker was showing flexibility on the Irish backstop, and predicted a deal.

Among shares in the Stoxx 600, outperformers included oil & gas, retail, health care, and telecom, while underperformers included industrial goods, autos & parts, basic resources, and media.

Danish pharma Novo Nordisk was a leader, up 2.9 percent, on US regulatory approval for its diabetes drug. Oil & gas shares perked up on rising oil prices, with Italy’s ENI up 1.2 percent. German bank Commerzbank rose 0.4 percent after it announced huge layoffs and other cost-cutting measures.

In economic news, German producer prices were softer than expected in August. Following a 0.1 percent increase in July, the headline index fell a sizeable 0.5 percent on the month to reduce annual inflation from 1.1 percent to just 0.3 percent. This was the PPI's fifth decline in the last seven months and its lowest yearly rate since November 2016. Separately, the EU Commission consumer confidence index improved slightly in September. At minus 6.5, the flash reading was up 0.6 points versus its final August level and on the firm side of expectations.

Asia Pacific markets

Major Asian markets closed Friday little changed but posted mixed results on the week. Japanese inflation data and adjustments by the People’s Bank of China to lending rates were the main focus of investor attention but had little market impact. Japan’s Nikkei and Topix indices closed up 0.2 percent and flat on the day respectively but outperformed on the week with gains of 1.5 percent and 1.3 percent respectively. Australia’s All Ordinaries index also advanced 0.2 percent on the day and 0.9 percent on the week. The Shanghai Composite index closed up 0.2 percent Friday but finished the week 0.8 percent lower, while Hong Kong’s Hang Seng index fell 0.1 percent on the day and was the worst performer in the region for the week with a drop of 3.4 percent.

Japanese inflation data published Friday showed a further fall in headline inflation and little change in measures of underlying inflation in August. The headline consumer price index rose 0.3 percent on the year in July, down from 0.5 percent in July, while the Bank of Japan's preferred measure of underlying inflation, CPI excluding fresh food and energy prices, was unchanged at 0.5 percent. This provides more evidence that reaching the Bank of Japan's 2.0 percent inflation target remains a slow process and follows comments from officials at the BoJ's policy meeting earlier in the week advising that they may need to consider whether the “momentum" toward meeting this target will be “lost”. BoJ Governor Haruhiko Kuroda has promised in recent months and again after this week's policy meeting that monetary policy will be eased further "without hesitation" if this momentum is assessed to have been lost. The drop in headline inflation shown in today's data may be enough to satisfy officials that this condition has been met ahead of their next policy meeting late October.

The People’s Bank of China published updated lending rates Friday, though adjustments to these rates were limited. As part of recent changes to lower borrowing costs and improve the operation of monetary policy, officials have designated the loan prime rate -- the rate domestic banks charge their most credit-worthy borrowers -- as an additional policy instrument. The 5-year loan prime rate was left unchanged at 4.85 percent but the 1-year loan prime rate was reduced by 5 basis points from 4.25 percent to 4.20 percent after being cut by 6 basis points last month. These cautious moves suggest that officials are open to providing more policy support to the domestic economy but remain wary about the the impact larger moves could have on debt levels and financial stability.

Hong Kong's headline consumer price index increased 3.5 percent on the year in August, up from 3.3 percent in July and its highest level since mid-2016. Officials attributed the further pick-up in inflation mainly to another acceleration in pork prices caused by ongoing shortages, with price pressures said to be "largely moderate" for other major components of the index.

Looking forward

Central Bank activities

Sep-25

New Zealand

RBNZ Policy Announcement

 

Japan

BOJ Monetary Policy Board Minutes

The following indicators will be released this week...

Europe

 

 

Sep-23

Eurozone

PMI Composite Flash (September)

 

France

PMI Composite Flash (September)

 

Germany

PMI Composite Flash (September)

Sep-24

France

Business Climate Indicator (September)

 

Germany

Ifo Survey (September)

Sep-26

Eurozone

M3 Money Supply (August)

 

Germany

Gfk Consumer Climate (October)

Sep-27

Eurozone

EC Economic Sentiment (September)

 

France

Consumer Manufactured Goods Consumption (August)

 

 

CPI (September f)

 

 

PPI (August)

 

Italy

Business and Consumer Confidence (September)

Asia Pacific

 

 

Sep-23

Japan

PMI Manufacturing Flash Index (September)

 

Singapore

CPI (August)

Sep-25

New Zealand

Merchandise Trade (August)

 

Singapore

Industrial Production (August)

Sep-26

Hong Kong

Merchandise Trade (August)

Americas

 

 

Sep-24

US

Consumer Confidence (September)

 

 

S&P Corelogic Case-Shiller HPI (July)

Sep-25

US

New Home Sales (August)

Sep-26

US

GDP (Q2 f)

 

 

International Trade in Goods (August)

 

 

Jobless Claims (Week of Sept. 21)

 

 

Pending Home Sales (August)

Sep-27

US

Consumer Sentiment (September f)

 

 

Durable Goods Orders (August)

 

 

Personal Income and Outlays (August)

Global stock markets

 

Index

20 Sep 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26935.07

-159.72

-0.6

 

NASDAQ

8117.68

-65.20

-0.8

 

S&P 500

2992.07

-14.72

-0.5

Canada

S&P/TSX Comp

16899.69

41.34

0.3

Europe

 

 

 

 

UK

FTSE 100

7344.92

-11.50

-0.2

France

CAC

5690.78

31.70

0.6

Germany

XETRA DAX

12468.01

10.31

0.1

Italy

MIB

22123.25

-4.99

0.0

Spain

Ibex 35

9179

43.00

0.5

Sweden

OMX Stockholm 30

1666.89

2.25

0.1

Switzerland

SMI

10056.83

-7.63

-0.1

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6838.96

13.79

0.2

Japan

Nikkei 225

22079.09

34.64

0.2

 

Topix

1616.23

0.57

0.0

Hong Kong

Hang Seng

26435.67

-33.28

-0.1

S. Korea

Kospi

2091.52

11.17

0.5

Singapore

STI

3159.68

0.88

0.0

China

Shanghai Comp

3006.45

7.17

0.2

Taiwan

TAIEX

10929.69

34.99

0.3

India

Sensex 30

38014.62

1921.15

5.3

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.