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On 23 September 2019 - Global shares: US flat; Europe falls; Asia mixed, China off

Anne D Picker

Anne D Picker - Econoday

Growth, trade worries undercut sentiment.

US markets

US equities gave up modest gains to end nearly flat Monday, as worries over growth and trade offset support from an uptick in Apple shares. The Dow industrials rose 0.1 percent, the S&P 500 was nearly flat at down 0.01 percent, and the NASDAQ declined 0.1 percent.

On the positive side, Apple (up 0.5 percent) and its suppliers gained after US regulators granted tariff exemptions for some of the iPhone maker’s products. On the negative side, markets reacted badly to a New York Times report that the US-Japan trade accord appears to be faltering over auto tariffs, along with continued uncertainty over US-China trade talks. Traders also noted weakness in Eurozone purchasing managers data, and ECB President Mario Draghi’s warning that growth may have slowed more than policy-makers understood.

Among sectors in the S&P 500, consumer sectors, REITs, and tech did better, while health care, communication services, and materials lagged. Among companies in focus, Exact Sciences Corp., a medical testing company, ended down 0.2 percent even after the Food and Drug administration allowed expanded use of its tests. Netflix fell 1.8 percent on negative coverage in Barron’s and elsewhere. The market appears to have fallen out of love with the streaming video company despite its recent acquisition of the streaming rights to Seinfeld. Facebook was off 1.6 percent amid ongoing concerns about regulatory trouble. Chewy, the pet food seller, rose 4.3 percent on an upgrade from Nomura.

In US economic news, nearly flat were both September's manufacturing PMI, at 51.0, and services PMI, 50.9. The composite for the month is 51.0 and little changed from August's 51.2 in a two-month stretch that is the weakest for these data in more than three years. And the outlook for October's activity isn't favorable based on new business growth which is at record lows.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell $1.33 to US$63.44, while gold rose by US$8.20 to US$1,531.70. The US dollar rose against most major currencies. The US Treasury 30-year bond yield was steady at 2.17 percent while the 10-year note yield was down 1 basis points to 1.71 percent.

European markets

European equities slipped and fixed-income markets gained Monday as weak Eurozone data revived recession fears. The Europe-wide STOXX 600 fell 0.8 percent, the German DAX dropped 1.0 percent, the French CAC fell 1.1 percent, and the UK FTSE-100 declined 0.3 percent. Gloomy purchasing managers data, and a Bundesbank warning of negative growth in the third quarter added to the risk-off tone.

Among shares in the Stoxx 600, underperformers included banks, basic resources, autos & parts, and technology while outperformers were defensive sectors -- food & beverage, utilities, and real estate. Banks got whacked, with Royal Bank of Scotland down 2.2 percent. Commerzbank fell 7.5 percent after additional bad news, a ratings downgrade by Moody’s. Meanwhile, trade-sensitive mining, autos, and tech stocks suffered from uncertainty over US-China trade talks. Export-oriented UK shares were supported by sterling’s latest weakness that helped cushion declines in the FTSE-100.

Among other companies in focus, trading in travel company Thomas Cook was suspended after the firm’s collapse left many travelers stranded. Other travel companies improved on expectations they will gain business from Thomas Cook’s loss, with TUI up 7.2 percent.

In economic news, the Eurozone flash composite output index fell to 50.4, down from 51.9 in August and well short of market expectations, pointing to the slowest growth in 75 months. The decline reflected worsening conditions in both manufacturing and services. The flash PMI for the former sunk from August's final 47.0 to a lowly 45.6, an 83-month trough. At 52.0, its services counterpart was at least still on the right side of the 50-expansion threshold but also below its 53.5 final August print and an 8-month low. Manufacturing output (46.0) saw its worst performance in nearly seven years and prospects of any near-term rebound look less than slim as new orders recorded another substantial decline. New business in services edged higher but overall, orders were down for the first time in eight months.

Asia Pacific markets

Japanese markets were closed for a holiday Monday, while US-China trade relations remained a key focus of attention with the regional data calendar relatively light. Chinese officials over the weekend described talks held last week in Washington D.C. as “constructive” but the falls on Wall Street after negative US-China headlines on Friday weighed on sentiment in Asia on Monday. The Shanghai Composite index closed down 1.0 percent and Hong Kong’s Hang Seng index fell 0.8 percent. Australia’s All Ordinaries index outperformed with a modest 0.3 percent gain.

Singapore's headline consumer price index advanced 0.5 percent on the year in August, up slightly from 0.4 percent in July, reflecting similar moves in key components, including housing and utilities charges, food, and transport costs. The Monetary Authority of Singapore's preferred measure of core inflation increased 0.8 on the year in August, as it did in July, matching its lowest level since 2016. MAS officials continue to forecast headline inflation to be between 1.0 percent and 1.5 percent in 2019 and for the core measure to average 0.5 percent to 1.5 percent. This assessment that price pressures will remain subdued over the near-term was a key factor driving their decision to leave monetary policy settings unchanged at their last semi-annual review in April, with the next review scheduled for mid-October.

Looking forward

On Tuesday in Asia/Pacific data, the Japanese PMI manufacturing index is due. In European data, the French Business Climate Indicator, the German Ifo Survey, and the UK public sector finances reports are scheduled for release. In North American data, US consumer confidence and S&P Corelogic Case-Shiller HPI figures are due.

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Note: all releases are listed in local time.

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