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On 25 March 2019 - Global stocks under pressure as manufacturing data show further weakness

Anne D Picker

Anne D Picker - Econoday

UK government postpones Brexit vote.

US markets

US stocks closed little changed Monday after data from Japan, Germany, and the US all showed further evidence of weakness in the global manufacturing sector. The Dow rose 0.1 percent on the day while the S&P and the Nasdaq both fell 0.1 percent. Apple closed lower Monday after announcing a new video streaming service and other products, while Boeing advanced on news it will brief airlines and aviation authorities about software and training updates for its 737 MAX aircraft.

Federal Reserve surveys were the main focus for the US data calendar Monday. The Dallas Fed’s survey of regional manufacturing activity showed a fall in its headline index from 13.1 in February to 8.3 in March, with respondents reporting stronger growth in production and employment but weaker new orders, in line with other indications that the factory sector has had a challenging start to the year. The Chicago Fed’s national activity index remained at low levels in February, reflecting weakness in indicators in most major areas of economic activity, including employment, production, consumption, and housing.

Chicago Fed President Charles Evans, a voting member of the FOMC, spoke Monday and said that he does not expect an increase in policy rates until 2020, most likely in the second half of the year. This assessment of the policy outlook reflects a downward revision to his forecast for US economic growth in 2019 from a previous estimate of 2.25 percent to a range of 1.75 percent to 2.0 percent. He also argued that there remains scope to loosen policy if growth or inflation were to fall short of expectations. 

These data reflect observations at 4pm US ET. Gold advanced US$10.00 to US$1,328,70 while dated Brent spot crude rose US$0.23 to US$67.26. The US dollar made a small gain against the pound, was flat against the yen, and fell moderately other major currencies. The yield on the US Treasury 30-year bond fell 1 basis points to 2.86 percent while the 10-year note dropped 4 basis points to 2.40 percent.

European markets

European markets posted modest falls Monday. The FTSE underperformed, down 0.4 percent, while the CAC and the DAX both fell 0.2 percent. French plane-maker Airbus fell early in the session but then pared these losses after Chinese President Xi Jingping announced on a state visit to Paris that China will purchase around US$35 billion worth of its aircraft.

Germany’s Ifo survey showed some improvement in business sentiment in March, with the headline index rising for the first time since last August from 98.1 to 99.6, above the consensus forecast of 98.6. Respondents were slightly more positive about current conditions but reported a strong increase in their confidence about the outlook. This improvement, however, was contained to the services, trade, and construction sectors, with the measure of manufacturers’ sentiment falling for a seventh consecutive month to its lowest level since early 2016, broadly in line with the flash PMI survey released last week. 

United Kingdom Prime Minister Theresa May has postponed holding another vote in parliament on the government’s Brexit deal, conceding that there is currently not enough support for it to pass.  The government has rejected suggestions that a second referendum be held on the UK’s membership of the European Union, but it remains unclear if and when withdrawal will take place and whether this will occur with an agreement in place. 

Asia Pacific Markets

Asian markets posted heavy falls Monday, broadly in line with the lead set by Wall Street on Friday. Japanese markets dropped particularly sharply after data showed further signs of weakness in domestic manufacturing, with the Nikkei and Topix indices falling 3.0 percent and 2.5 percent respectively. Declines were also pronounced elsewhere, with the Shanghai Composite Index and Hong Kong’s Hang Seng index both closing down 2.0 percent on the day and Korea’s Kospi index down 1.9 percent. 

Japanese data provided another indication of broad-based weakness in the global manufacturing sector. The All Industry Index fell 0.2 percent on the month in January, with strong rebounds in services and construction activity offset by a sharper decline in the industrial production index, down 3.5 percent on the month after falling 0.1 percent in December. This fall in the industrial production index is consistent with the Nikkei Manufacturing PMI survey, which also showed a sharp drop in its headline index in January, followed by further weakness in February and March. Singapore data showed a small increase in headline inflation from 0.4 percent in January to 0,65 percent in February but a fall in core inflation from 1.7 percent to 1.5 percent.

Looking forward

New Zealand trade data will be published shortly, followed by Singapore industrial production data. The French GDP report is the highlight of the European data calendar Tuesday, with the Richmond Fed’s manufacturing index, the Redbook retail survey, and and data on housing starts, consumer confidence, and house prices all scheduled for release in the US.

Global Stock Markets

 

Index

Mar 25 2019

Daily Change

% Change Daily

North America

United States

Dow

25516.83

14.51

0.1

 

NASDAQ

7637.54

-5.13

-0.1

 

S&P 500

2798.36

-2.35

-0.1

Canada

S&P/TSX Comp

16065.86

-23.47

-0.1

Europe

UK

FTSE 100

7177.58

-30.01

-0.4

France

CAC

5260.64

-9.28

-0.2

Germany

XETRA DAX

11346.65

-17.52

-0.2

Italy

MIB

21059.6

-19.16

-0.1

Spain

Ibex 35

9179.9

-19.50

-0.2

Sweden

OMX Stockholm 30

1573.66

-3.21

-0.2

Switzerland

SMI

9305.5

-13.92

-0.1

Asia/Pacific

Australia

All Ordinaries

6208.72

-72.15

-1.1

Japan

Nikkei 225

20977.11

-650.23

-3.0

 

Topix

1577.41

-39.70

-2.5

Hong Kong

Hang Seng

28523.35

-590.01

-2.0

S. Korea

Kospi

2144.86

-42.09

-1.9

Singapore

STI

3182.92

-29.18

-0.9

China

Shanghai Comp

3043.03

-61.12

-2.0

Taiwan

TAIEX

10479.48

-159.59

-1.5

India

Sensex 30

37808.91

-355.70

-0.9

Source: Haver Analytics

Note: all releases are listed in local time.

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