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On 22 February 2019 - Global stocks advance on signs of progress in US-China trade talks

Anne D Picker

Anne D Picker - Econoday

UK government postpones planned vote as cabinet ministers call for Brexit delay if no deal is reached.

US markets

US stocks closed Friday higher on the day and the week as officials reported progress on US-China trade talks in Washington. The Dow advanced 0.7 percent on the day and 0.6 percent on the week, the S&P gained 0.6 percent on the day and on the week, and the Nasdaq outperformed modestly with an increase of 0.9 percent on the day and 0.7 percent on the week.

Kraft Heinz shares collapsed Friday after the food manufacturer reported late Thursday heavy fourth-quarter losses and a large write-down in the value of key brands and businesses. Executives also advised investors that US regulators are investigating the company’s procurement operations. Berkshire Hathaway, which owns more than 26 percent of Kraft Heinz, also posted a heavy fall on Friday, with executives advising that Kraft Heinz’s performance was the main factor driving weakness in its fourth-quarter results.

US-China trade talks continued in Washington on Friday and extended into the weekend. US officials reported progress on the issue of currency manipulation, but intellectual property protections and enforcement mechanisms for any deal are said to remain obstacles. US tariffs on Chinese imports are scheduled to increase from 10 percent to 25 percent later this week, but it appears likely that this increase will not go ahead with President Trump indicating that the deadline will be extended ahead of a possible meeting with President Xi next month.

Federal Reserve Vice Chairman Richard Clarida spoke Friday and provided details about some of the issues being considered in an internal review of the conduct and communication of monetary policy. Among these issues is whether officials should aim to hit the 2.0 percent inflation target every year or seek to meet this target on average over a longer time-frame if the target is not met in the short-term. Vice Chairman Clarida noted research that indicates the latter approach tends to yield better outcomes but also acknowledged that it can make the communication of policy more difficult. His speech also addressed whether the Federal Reserve should use other policy tools in addition to its main policy rate. Officials are conducting public consultation sessions in coming months, with the results of the review scheduled for release early next year.

These data reflect observations at the close of trading Friday. Gold rose US$5.00 to US$1,332.80 while dated Brent spot crude rose US$0.05 to US$67.12. The US dollar lost ground against the Canadian dollar and the Australian dollar Friday but moves against other major currencies were limited. The yield on the US Treasury 30 year bond fell 3 basis points to 3.02 percent while the 10 year note fell 4 basis points to 2.65 percent.

European markets

European markets posted modest gains Friday but mixed results on the week. The FTSE closed up 0.2 percent on the day but fell 0.8 percent on the week. French and German indices, however, recorded similar gains, with the CAC up 0.4 percent on the day and 1.2 percent on the week, and the DAX up 0.3 percent on the day and 1.4 percent on the week. Trade-related stocks outperformed on confidence about the prospects of a US-China trade deal but European food and beverage manufacturers, including Nestle, Danone and Unilever, were among the underperformers on Friday after Kraft Heinz reported weak results on Thursday.

UK Prime Minister Theresa May confirmed over the weekend that a revised Brexit deal will not be put to parliament this week as previously planned but promised that a vote will be held by 12 March. The UK is scheduled to withdraw from the European Union at the end of March, but it remains unclear whether the EU will agree to concessions required to secure the support of the UK parliament which leaves open the possibility that the UK may withdraw without a deal in place. Three UK cabinet ministers announced on the weekend that they would favour a delay to Brexit if no deal can be reached in time. 

Revised German data for the three months to December left headline economic growth unchanged from previous estimates, with GDP flat on the quarter and up 0.6 percent on the year. Revisions to components, however, indicate that underlying conditions, though still subdued, were better than previously estimated, with somewhat stronger consumer spending and business investment offset by a rundown in inventories. Also published Friday, the Ifo survey showed German business sentiment has deteriorated further in February, with respondents reporting current conditions are at their weakest since December 2014 and expectations at their gloomiest since December 2012. In line with flash PMI surveys published earlier in the week, the Ifo survey suggests economic growth in the current quarter will again be sluggish. Revised data showed the HICP measure of inflation for the Eurozone was 1.4 percent in January, unchanged from the initial estimate and confirming a small fall from 1.5 percent in December. The underlying HICP measure was also unchanged from the initial estimate of 1.1 percent in January, confirming a modest increase from 0.9 percent in December.  

Asia Pacific Markets

Asian markets were mixed Friday, with solid gains in China and Hong Kong but little change elsewhere in the region. The Shanghai Composite index advanced 1.9 percent on the day and 4.5 percent on the week as investors priced in a stronger chance of a US-China trade deal, while Hong King’s Hang Seng index gained 0.7 percent on the day and 3.3 percent on the week. Japan’s Nikkei and Topix indices both fell 0.2 percent on low trading volumes Friday but advanced 2.5 percent and 2.0 percent respectively on the week. Australia’s All ordinaries index closed Friday up 0.4 percent on the day and up 1.5 percent on the week.

The Australian dollar gained Friday after it had fallen sharply on Thursday on reports that Chinese authorities had placed restrictions on imports of Australian coal. Australian officials, however, have downplayed suggestions that any delays in the processing of coal imports have been motivated by political factors, allaying concerns that broader trading flows between China and Australia might be impacted. Japanese inflation data released Friday showed headline consumer price pressures in Japan remained subdued in January, mainly reflecting the impact of food prices. Measures of underlying inflation, however, picked up modestly, broadly in line with forecasts from the Bank of Japan for core inflation to pick up slightly in the coming fiscal year.

Looking forward

The following indicators will be released this week...

Europe

Feb 27

Eurozone

EC Economic Sentiment (February)

Feb 28

France

Consumer Price Index (January)

 

 

GDP (Fourth Quarter Preliminary)

 

Germany

Consumer Price Index (February)

 

Italy

Consumer Price Index (February)

 

Switzerland

GDP (Fourth Quarter)

Mar 1

Eurozone

HICP Flash (February)

 

Switzerland

Adjusted Real Retail Sales (January)

 

UK

CIPS/PMI Manufacturing Index (February)

Asia Pacific

Feb 25

Singapore

Consumer Price Index (January)

Feb 26

Singapore

Industrial Production (January)

Feb 27

New Zealand

Merchandise Trade (January)

Feb 28

Australia

Private New Capital Expenditures (Fourth Quarter)

 

China

CFLP Manufacturing Index (February)

 

India

Consumer Price Index (January)

 

Japan

Industrial Production (January)

Mar 1

India

GDP (Fourth Quarter)

 

 

PMI Manufacturing Index (February)

 

China

PMI Manufacturing Index (February)

Americas

Feb 26

US

Housing Starts (December)

Feb 27

Canada

Consumer Price Index (January)

 

US

Factory Orders (December)

 

 

International Trade in Goods (December)

Feb 28

US

GDP (Fourth Quarter Initial)

Mar 1

Canada

Monthly GDP (December)

 

US

Personal Income and Outlays (January/February)

 

 

ISM Manufacturing Index (February)

Global Stocks Markets

 

Index

Feb 22 2019

Daily Change

% Change Daily

North America

United States

Dow

26031.81

181.18

0.7

 

NASDAQ

7527.54

67.83

0.9

 

S&P 500

2792.67

17.79

0.6

Canada

S&P/TSX Comp

16013.01

12.15

0.1

Europe

UK

FTSE 100

7178.60

11.21

0.2

France

CAC

5215.85

19.74

0.4

Germany

XETRA DAX

11457.70

34.42

0.3

Italy

MIB

20262.51

52.79

0.3

Spain

Ibex 35

9204.60

13.40

0.1

Sweden

OMX Stockholm 30

1588.83

16.18

1.0

Switzerland

SMI

9348.93

15.36

0.2

Asia/Pacific

Australia

All Ordinaries

6241.88

27.26

0.4

Japan

Nikkei 225

21425.51

-38.72

-0.2

 

Topix

1609.52

-3.98

-0.2

Hong Kong

Hang Seng

28816.30

186.38

0.7

S. Korea

Kospi

2230.50

1.84

0.1

Singapore

STI

3269.90

-8.01

-0.2

China

Shanghai Comp

2804.23

52.43

1.9

Taiwan

TAIEX

10322.92

3.39

0.0

India

Sensex 30

35871.48

-26.87

-0.1

Source: Haver Analytics

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.