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On 25 February 2019 - Global stocks move higher as President Trumps halts tariff hikes

Anne D Picker

Anne D Picker - Econoday

Comments from President Trump also push oil prices lower; Brexit stalemate continues ahead of UK parliament vote. 

US markets

US stocks made modest gains Monday after President Trump announced US tariffs on Chinese imports would not be raised later this week. The Dow closed up 0.2 percent, the S&P rose 0.1 percent, and the Nasdaq advanced 0.4 percent. Trade-sensitive shares such as Caterpillar and Boeing were among the stronger performers on the day.

President Trump confirmed late Sunday that he would delay planned tariff increases on Chinese imports, citing “substantial progress” at US-China trade talks over the last two weeks. Tariffs were set to increase from 10 percent to 25 percent later this week. President Trump did not specify a new deadline but advised that if progress continues, he would meet President Xi to conclude an agreement.

General Electric and Danaher both surged Monday after the former announced it had sold its biotechnology business to the latter for US$21 billion in cash, with the proceeds providing a boost to General Electric’s efforts to reduce its debt and focus on core businesses. In a separate deal, General Electric also finalised the sale of its transportation business to Wabtec, which also closed higher on the day. General Electric shares have rallied strongly in recent months but remain well down from levels seen this time last year.

US data published Monday provided mixed signals. The Chicago Fed’s national activity index, a composite of 85 different indicators, fell from 0.05 in December to minus 0.43 in January, largely reflecting the impact of an unusual swing in auto production, though on a three-month moving average basis the index was steady. The Dallas Fed regional manufacturing survey showed an improvement in general conditions in February but weaker output. Wholesale trade data for December, delayed by the government shutdown last month, showed a 1.0 percent fall in wholesale sales and a 1.1 percent increase in wholesale inventories, suggesting a boost to GDP growth in the three months to December but also indicating that wholesalers may be looking to scale back inventories this year.

These data reflect observations at 4:00 PM US ET. Gold fell US$3.70 to US$1,329.10 while dated Brent spot crude dropped US$2.45 to US$64.67 after President Trump expressed dissatisfaction with recent increases and suggestion that further hikes would harm global growth. The US dollar advanced against the yen and the Canadian dollar, was unchanged against the Swiss franc, and fell against the Australian dollar, the yuan, the pound, and the euro. The yield on the US Treasury 30 year bond rose 2 basis points to 3.04 percent while the 10 year note advanced basis points to 2.67 percent.

European markets

European markets closed higher Monday after President Trump’s announcement that planned tariff hikes would not proceed, though gains were modest. The FTSE closed up 0.1 percent, the CAC advanced 0.3 percent and the DAX rose 0.4 percent, with auto stocks among the stronger performers. Italy’s MIB index outperformed other regional indices with an increase of 0.9 percent after credit agency Fitch affirmed its BBB rating to Italian sovereign debt.

UK opposition leader Jeremy Corbyn has announced the Labour party will support a new Brexit referendum.  Prime Minister Theresa May has said she remains “focussed” on ensuring Brexit goes ahead on schedule at the end of March, despite calls from many, including in her own government, for withdrawal to be delayed if a deal with the European Union acceptable to the parliament cannot be achieved. European Council President Donald Tusk said Monday that if the UK parliament does not approve a deal in time then delaying Brexit would be a “rational solution” instead of proceeding with the withdrawal with no agreement in place. Prime Minister May has promised to hold a definitive vote in parliament by 12 March but has also indicated that this vote might take place even if any revised deal has not yet been approved by the EU.

The European data calendar was light Monday. Swiss employment increased 0.2 percent on the quarter and 1.3 percent on the year in the three months to December, with solid growth in service sector payrolls outweighing a modest decline in manufacturing jobs. Solid labour market data suggest GDP data to be published later in the week will show a return to positive economic growth after the Swiss economy contracted by 0.2 percent on the quarter in the three months to September.

Asia Pacific Markets

Most Asian markets posted solid gains Monday, but China’s Shanghai Composite index surged on the news that tariff increases have been delayed, closing the day up 5.6 percent. This is the biggest one-day gain since mid-2015, with several stocks reaching the 10 percent daily maximum increase. The index has now rallied by more than 20 percent since its recent low in early January. Investor sentiment was also boosted by comments from President Xi, reported in the official media over the weekend, supporting a greater role for the financial sector in the Chinese economy.

India’s Sensex index also rose strongly Monday, closing up 1.0 percent with property shares receiving a boost from a cut, announced by authorities over the weekend, in the sales tax rate on residential properties under construction from 12 percent to 5 percent. Elsewhere in the region, Japan’s Nikkei and Topix indices advanced 0.5 percent and 0.7 percent respectively, Taiwan’s TAIEX index rose 0.7 percent, and Hong Kong’s Hang Seng index closed up 0.5 percent. New Zealand retail sales data published Monday showed a rebound in the three months to December, with stronger sales for supermarket and grocery stores and food and beverage services outweighing weaker motor vehicle and fuel sales.

Singapore data showed a fall in both headline and underlying inflation in January, with officials at the Monetary Authority of Singapore also revising down their near-term inflation forecasts in response to recent declines in global oil prices.

Looking forward

Singapore industrial production, Hong Kong trade, and German consumer sentiment data are scheduled for publication ahead of a busy US data calendar. US housing market data scheduled for release include housing starts and the Case-Shiller house price index, with consumer confidence data and the Richmond Fed manufacturing index also due. Federal Reserve Chairman Jerome Powell will deliver the semi-annual monetary report to Congress before the Senate Committee on Banking, Housing and Urban Affairs.

Global Stock Markets

 

Index

Feb 25 2019

Daily Change

% Change Daily

North America

United States

Dow

26091.95

60.14

0.2

 

NASDAQ

7554.46

26.92

0.4

 

S&P 500

2796.11

3.44

0.1

Canada

S&P/TSX Comp

16057.03

44.02

0.3

Europe

UK

FTSE 100

7183.74

5.14

0.1

France

CAC

5231.85

16.00

0.3

Germany

XETRA DAX

11505.39

47.69

0.4

Italy

MIB

20436.96

174.45

0.9

Spain

Ibex 35

9204.30

-0.30

0.0

Sweden

OMX Stockholm 30

1586.55

-2.28

-0.1

Switzerland

SMI

9398.37

49.44

0.5

Asia/Pacific

Australia

All Ordinaries

6263.57

21.69

0.3

Japan

Nikkei 225

21528.23

102.72

0.5

 

Topix

1620.87

11.35

0.7

Hong Kong

Hang Seng

28959.30

143.00

0.5

S. Korea

Kospi

2232.56

2.06

0.1

Singapore

STI

3272.35

2.45

0.1

China

Shanghai Comp

2961.28

157.05

5.6

Taiwan

TAIEX

10390.93

68.01

0.7

India

Sensex 30

36213.38

341.90

1.0

Source: Haver Analytics

Note: all releases are listed in local time.

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