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On 24 July 2019 - US, Europe mixed on earnings, Asia better

Anne D Picker

Anne D Picker - Econoday

Markets hopeful on US-China trade as talks to resume Monday.

US markets

US stocks were mixed to higher Wednesday as quarterly earnings remained the focus. The Dow was depressed by disappointing results from Caterpillar and Boeing, while the wider market was bolstered by positive earnings surprises from United Parcel Service and Texas Instruments, and others. The Dow industrials slipped 0.3 percent, the S&P 500 rose 0.5 percent, and the NASDAQ gained 0.8 percent. 

Caterpillar was off 4.4 percent after reporting Q2 earnings-per-share of $2.83, below the expected $3.12, with revenues in line with estimates. Boeing fell 3.1 percent after reporting a loss of $5.21 per share, or $5.82 per share ex-items, compared to the FactSet estimate calling for a profit of $3.33 per share. The aerospace giant did not issue guidance because of uncertainty over its grounded 737 MAX aircraft. 

Among other shares in focus, credit card issuer Visa rose 1.2 percent after an earnings beat and upward revision to its full-year guidance. United Parcel Service advanced 8.9 percent on an earnings and revenue beat, and after reaffirming its full-year guidance. Texas Instruments rallied 7.5 percent after reporting Q2 EPS of $1.36, or $1.29 ex-items, compared to the expected $1.22, and guidance that exceeded expectations.

Facebook rose 1.1 percent after the company said it would pay $5 billion to settle a dispute with the Federal Trade Commission over the social media giant’s privacy practices.

In economic news, the US housing sector is visibly fading after a strong start to the year, as new home sales came in at a lower-than-expected 646,000 annual rate in June. The 3-month average at 636,000 compares unfavorably against a 673,000 peak in April. US-China trade talks are scheduled to resume on Monday in Beijing, news that markets take as a positive signal on prospects for at least a trade truce.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude fell 95 cents to US$63.26 while gold rose US$6.40 to US$1,423.78. The US dollar was on net little changed against most major currencies. The yield on the US Treasury 30-year bond yield was down 3 basis points at 2.58 percent while the yield on the 10-year note was down 3 basis points at 2.04 percent.

European markets

European equities were mixed to weaker Wednesday, with UK markets a notable laggard on losses in mining shares. Weak economic data and negative earnings reports depressed European stocks but expectations for policy support from the European Central Bank bolstered sentiment, along with rising expectations for a US-China trade pact.

Markets generally 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.

The Europe-wide STOXX 600 rose 0.05 percent, the German DAX rose 0.3 percent, the French CAC declined 0.2 percent, and the UK FTSE 100 fell 0.7 percent. Aston Martin, the UK luxury automaker, plunged by 24 percent after slashing its sales outlook. UK miners Rio Tinto (down 4.6 percent) and Anglo American (down 3.3 percent) were among the biggest losers as iron prices dropped on news Brazilian miner Vale would resume production.

Technology, autos, and media outperformed, while basic resources, banks, and personal and household goods underperformed in the Euro Stoxx 600. Among top names reporting results, Deutsche Bank (down 2 percent) fell after reporting larger than expected quarterly losses. Other bank shares sold off after the Deutsche Bank results; several large UK banks, including Barclays and RBS, are scheduled to report their quarterly results next week.

In economic news, flash Eurozone PMI results for July were worryingly weak and point to sustained soft growth of GDP as contracting activity in manufacturing weighs on relatively respectable activity rates in services. The flash composite output index was just 51.5, down 0.7 points versus its final June reading and short of market expectations. It was also ominously close to the 50-expansion threshold and a 3-month low. The headline decline was largely due to dire results in manufacturing where the flash PMI dropped 1.2 points from its final June mark to 46.4, its worst outturn in 79 months. Manufacturing output (47.0) touched a 75-month trough. By contrast, its services counterpart dipped just 0.3 points and at 53.3, continued to signal at least moderate business momentum.

Asia Pacific Markets

Most major Asian markets posted solid gains Wednesday, with investor sentiment supported by solid US earnings reports overnight and hopes that US-China trade talks next week will yield progress. The Shanghai Composite index was the strongest regional performer, closing up 0.8 percent while Australia’s All Ordinaries index rose 0.7 percent, with gains there boosted by increased expectations of more policy rate cuts. The Nikkei and Topix indices both advanced 0.4 percent, while Hong Kong’s Hang Seng index closed up 0.2 percent. 

The flash PMI survey for Japan was the main focus of the regional data calendar Wednesday, with the survey including for the first time estimates for the services index and the composite index in addition to the manufacturing index. The flash estimates indicate further weakness in the manufacturing sector in July, but modest improvement in service sector conditions and, as a result, the overall performance of the Japanese economy.  Respondents, however, cited weak Chinese demand as a significant factor weighing on activity and sentiment.

New Zealand's merchandise trade surplus widened from a revised NZ$175 million in May to NZ$365 million in June, with year-on-year export growth slowing but imports falling sharply on the year. Exports rose 2.8 percent on the year in June, down from a revised increase of 7.4 percent in May, mainly reflecting relatively subdued growth in exports of dairy products and weak demand from Australia and the United States, offset by strong demand from China. Imports of goods fell 10.0 percent on the year in June, weakening sharply from revised growth of 8.1 percent in May, with sharp falls in imports of petroleum and automobiles.

Looking forward

The big macro news event Thursday will be the ECB monetary policy announcement. In Asian data, Hong Kong’s merchandise trade report is due. In Europe, the German Ifo Survey and UK CBI Distributive Trades report will be released. In the US, durable goods, international trade in goods, and jobless claims will be released.

Global Stock Markets

 

Index

24 Jul 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

27269.97

 

-79.22

 

-0.3

 

NASDAQ

8321.5

 

70.10

 

0.8

 

S&P 500

3019.56

 

14.02

 

0.5

Canada

S&P/TSX Comp

16611.84

 

38.18

 

0.2

Europe

 

 

 

 

UK

FTSE 100

7501.46

 

-55.40

 

-0.7

France

CAC

5605.87

 

-12.29

 

-0.2

Germany

XETRA DAX

12522.89

 

32.15

 

0.3

Italy

MIB

22080.32

 

125.66

 

0.6

Spain

Ibex 35

9329.7

 

48.10

 

0.5

Sweden

OMX Stockholm 30

1613.06

 

-11.71

 

-0.7

Switzerland

SMI

9907.68

 

-57.47

 

-0.6

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6862.39

 

49.91

 

0.7

Japan

Nikkei 225

21709.57

 

88.69

 

0.4

 

Topix

1575.09

 

6.27

 

0.4

Hong Kong

Hang Seng

28524.04

 

57.56

 

0.2

S. Korea

Kospi

2082.3

 

-19.15

 

-0.9

Singapore

STI

3368.44

 

-4.69

 

-0.1

China

Shanghai Comp

2923.28

 

23.33

 

0.8

Taiwan

TAIEX

10935.76

 

-11.50

 

-0.1

India

Sensex 30

37847.65

 

-135.09

 

-0.4

Note: all releases are listed in local time.

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