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On 23 July 2019 - US, Europe, Asia gain on earnings, hopes for US-China talks

Anne D Picker

Anne D Picker - Econoday

Expectations for global monetary easing underpin markets.

US markets

US stocks rose Tuesday on upbeat quarterly earnings news, with materials, financials, and consumer staples leading.  Markets cheered word that face-to-face US-China trade talks would resume on Monday, although there were no specifics on prospects for an accord. News of a debt ceiling and budget accord between Congress and President Trump added to the better mood.

The Dow industrials and the S&P 500 both rose 0.7 percent, and the NASDAQ gained 0.6 percent. With 21 percent of S&P 500 companies reporting quarterly earnings so far, FactSet estimates 79% have exceeded expectations, better than the 76% one-year average.

Among companies in focus, Coca-Cola (up 6 percent) and consumer paper goods maker Kimberly Clark (up 0.6 percent), reported strong organic growth and raised full-year guidance.  Toymaker Hasbro soared 10.8 percent on a big earnings and revenue beat.  Banks and credit card companies led financials higher, with Fifth Third up 5.1 percent and KeyCorp up 3.6 percent on favorable earnings.

Aerospace company United Technologies (up 1.5 percent) beat expectations, as did Lockheed Martin (up 0.02 percent). Dow component Travelers Corp. was a laggard, down 1.5 percent after the insurance company reported an earnings miss. Utilities and communications stocks underperformed.

In economic news, US existing home sales came in softer-than-expected at a 5.270 million annual rate in June, which, however, is right in line with the 3-month average of 5.280 million.  Single-family resales fell 1.5 percent in the month to a 4.690 million pace while condo sales, the second component in the report, fell 3.3 percent to 580,000.  Separately, Fifth District manufacturing activity unexpectedly fell into contraction in July, according to the latest survey from the Richmond Fed, whose composite index fell 14 points from June's revised reading of 2 to minus 12, its lowest level since January 2013. 

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude rose 79 cents to US$64.09 while gold fell US$8.44 to US$1,416.69. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield was up 3 basis points at 2.60 percent while the yield on the 10-year note was up 2 basis points at 2.07 percent

European markets

European equities advanced Tuesday on upbeat earnings, with cyclical stocks, including banks and autos, leading the way, amid expectations for monetary policy support and progress on US-China trade disputes. The Europe-wide STOXX 600 rose 1 percent, the German DAX jumped by 1.6 percent, the French CAC rose 0.9 percent, and the UK FTSE 100 gained 0.6 percent.  

Stocks got a lift from a Bloomberg story saying the Bank of Japan would downgrade its growth and inflation forecasts at its policy meeting next week, a signal the BOJ was likely to introduce new monetary stimulus. This fed the global easing narrative, including expectations for new monetary support from the ECB.  Markets expect the ECB will leave rates on hold on Thursday but will signal a rate cut and other possible easing measures to come in September.

On the negative side, Bank of England Chief Economist David Haldane warned markets not to count on rate cuts. And the US-EU trade dispute remains in focus as the EU threatened to retaliate if the US imposes tariffs on European autos. UK stocks got a boost from weakness in sterling after Brexit hardliner Boris Johnson won the Conservative Party vote to become the next prime minister.

French auto parts maker Faurecia (up 12 percent) led auto shares higher after reporting upbeat results for the first half.  Daimler rose 5 percent on news that Beijing Automotive Group had bought a 5 percent stake in the German automaker. Earnings from Banco Santander (up 2.8 percent) and Swiss Bank UBS (up 2.5 percent) beat expectations, and helped bank shares outperform.

Chemicals and basic resource shares also outperformed, with retail and real estate notable underperformers in the Stoxx 600.

In economic news, The UK CBI's latest Trends survey found manufacturing in dire straits in July. The headline orders balance slumped 19 points to minus 34 percent, its fifth fall in a row and its weakest reading since April 2010, at the tail end of the Great Recession. Both domestic and overseas markets contracted significantly.  Meanwhile, the EU Commission's flash gauge of consumer confidence rose 0.6 points to a stronger than expected minus 6.6 in July.

Asia Pacific Markets

Asian markets closed higher Tuesday, with news that US-China trade talks will resume next week in Beijing providing some support to investor sentiment. Japanese shares were the strongest performers in the region, with the Nikkei and Topix indices closing up 1.0 percent and 0.8 percent respectively. The Shanghai Composite index and Australia’s All Ordinaries index both rose 0.5 percent the day, while Hong Kong’s Hang Seng index advanced 0.3 percent.

The Asia data calendar was again light Tuesday. Singapore's headline consumer price index advanced 0.6 percent on the year in June, slowing from 0.9 percent in May, while core inflation moderated from 1.3 percent to 1.2 percent. The fall in headline inflation was largely driven by transport costs and housing and utilities charges, with the year-on-year change in food prices steady at 1.4 percent. Officials at the Monetary Authority of Singapore retain their assessment that price pressures are likely to remain subdued over the rest of the year, an assessment that underpinned their decision to leave monetary policy settings unchanged at their semi-annual review in April.

Looking forward

On Wednesday in Asia, Japan’s PMI manufacturing index is due. In Europe, Eurozone M3 money supply, Eurozone PMI composite flash, French business climate, French PMI composite flash, and German PMI composite flash data are scheduled for release. In the US, new home sales and EIA Petroleum Status data will be released.

Global Stock Markets

 

Index

23 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27349.19

177.29

0.6

 

NASDAQ

8251.4

47.26

0.6

 

S&P 500

3005.54

21.06

0.7

Canada

S&P/TSX Comp

16573.66

61.47

0.4

Europe

 

 

 

 

UK

FTSE 100

7556.86

41.93

0.6

France

CAC

5618.16

51.14

0.9

Germany

XETRA DAX

12490.74

201.34

1.6

Italy

MIB

21954.66

218.96

1.0

Spain

Ibex 35

9281.6

118.10

1.3

Sweden

OMX Stockholm 30

1624.77

23.89

1.5

Switzerland

SMI

9965.15

42.78

0.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6812.48

31.23

0.5

Japan

Nikkei 225

21620.88

204.09

1.0

 

Topix

1568.82

12.45

0.8

Hong Kong

Hang Seng

28466.48

95.22

0.3

S. Korea

Kospi

2101.45

8.11

0.4

Singapore

STI

3373.13

15.91

0.5

China

Shanghai Comp

2899.95

12.98

0.4

Taiwan

TAIEX

10947.26

2.73

0.0

India

Sensex 30

37982.74

-48.39

-0.1


Note: all releases are listed in local time.

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