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On 25 April 2019 - Global stocks mixed: 3M hits Dow in US, merger cancellations rattle Europe

Anne D Picker

Anne D Picker - Econoday

Bank of Japan joins run of central banks shifting to greater stimulus.

US markets

US stocks were mixed Thursday with the Dow posting a 0.5 percent loss to 26,462 on a sharp decline from component 3M, a diversified manufacturer whose disappointing results have reawakened concerns over global demand. The S&P posted only a fractional loss while the Nasdaq, benefiting from earnings-related strength for technology shares, rose 0.2 percent.

The first-quarter earnings season is about 1/3 completed and so far results have been better than expected. This excludes, however, 3M which cut its earnings forecast for the year and is also cutting 2,000 jobs. The news refocused attention on what has been a mostly weak run for global economic data so far this year and also overshadowed strong earnings and strong gains during the session for both Facebook and Microsoft.

3M also overshadowed what was a very healthy report on US durable goods orders which rose 2.7 percent in March and showed an unusually strong 1.3 percent rise in orders for core capital goods, a gain that points to rising business investment. The durables data also included strong gains for both new orders and unfilled orders of commercial aircraft, gains that do not indicate any trouble yet tied to the grounding of the Boeing 737 MAX.

Other economic data released in the session included a sharp jump in weekly initial jobless claims in results likely tied to adjustment difficulties for Easter and are unlikely to affect the outlook for what is expected next week to be a second straight strong showing for the monthly US employment report.

These data reflect observations at 4:00 PM US ET. Brent spot crude fell US$0.29 to $74.24 while gold rose US$1.70 to $1,277.45. The US dollar firmed against the yuan and the euro, was little changed against the pound and the Australian and Canadian dollars and weakened against the yen. The yield on the US Treasury 30-year bond rose 1 basis point to 2.95 percent while the yield on the 10-year note rose 1 basis points to 2.53 percent.

European markets

Two headline mergers were scratched Thursday and European shares mostly retreated including the FTSE which lost 0.5 percent and the CAC and DAX which lost 0.3 and 0.2 percent respectively. Yet markets in both Spain and Switzerland posted gains.

UK regulators blocked a merger between supermarket chains Sainsbury and Walmart unit ASDA saying the deal would raise prices for consumers. Sainsbury, whose shares fell sharply on the news, disagreed with the ruling and said it will not now pursue the deal.

In Germany, Deutsche Bank and Commerzbank have ended their merger talks with Commerzbank saying a deal would not create sufficient benefits and also cited related costs. Banks were generally on the defensive in Europe headlined by Barclays which said unfavorable market conditions are hurting its investment bank units. UBS Group, however, moved higher despite reporting similar weakness at its investment unit.

Homebuilders in the UK posted sharp losses after Taylor Wimpey issued a profit warning due to rising building costs. Shares of Persimmon, Barratt and Berkeley also fell.

In Brexit news, reports said Theresa May will be seeking parliament approval once again for her Brexit deal which has already been repeatedly rejected. Russian oil is also in the news after contamination of the Druzhba pipeline led to Poland and Germany suspending imports. Oil showed little reaction to the news.

Economic news in Europe was limited but did include surprisingly strong retail and wholesale data out of the UK. April's CBI Distributive Trades Survey showed a balance of 13 percent of respondents reporting an increase in volume sales from a year ago, up sharply from March's minus 18 percent and the strongest reading since November 2018. This was the first increase in five months and the CBI's forecast for May, at 23 percent, is even more positive. Yet the report warned that levels of uncertainty remain high and ongoing gains may be getting a boost from Brexit-related stockpiling.

Asia Pacific Markets

With both the Nikkei and Topix posting 0.5 percent gains, Japanese markets were upbeat as the Bank of Japan strongly underscored the need for continuing monetary stimulus. Other Asian indexes, however, posted losses including a 2.4 percent drop for the Shanghai Composite and a 0.9 dip for the Hang Seng. The Australia market was closed for ANZAC day.

The Bank of Japan's Monetary Policy Board left monetary policy settings unchanged at the conclusion of its April meeting, in line with expectations, but advised that it is "making clearer" its plans to maintain aggressive policy easing. The BoJ's short-term policy rate for excess reserves remains, as it has since early 2016, at minus 0.1 percent while the target level for the long-term 10-year yield remains at around zero percent. Officials believe that purchasing JGBs at an annual rate of Y80 trillion is consistent with meeting this target. MPB members voted 7-2 in favor of these decisions. Officials' assessment of the domestic outlook is less certain than previously. They consider the economy to be "expanding moderately" and expect this to continue, and they also retained their view that inflation is likely to increase "gradually" towards their target level of 2.0 percent. However, officials also argued that there are "high uncertainties" facing the outlook for both economic activity as well as prices.

Japanese markets will be shut from April 29 to May 6 in an unusually long Golden Week stretch that will dry up market liquidity and is raising concern over the risk of flash crashes during this period, especially in the currency market.

Looking forward

Friday's data in Asia will include merchandise trade from New Zealand, producer prices from Australia and industrial production from Singapore. Japan will post three major reports: unemployment, industrial production, and retail sales. No major data are scheduled in Europe in contrast to the US where first-quarter GDP will be posted amid rising expectations for moderate-to-solid growth.

Global Stock Markets

 

Index

25 Apr 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26462.08

-134.97

-0.5

 

NASDAQ

8118.68

16.67

0.2

 

S&P 500

2926.17

-1.08

0.0

Canada

S&P/TSX Comp

16576.1

-10.42

-0.1

Europe

 

 

 

 

UK

FTSE 100

7434.13

-37.62

-0.5

France

CAC

5557.67

-18.39

-0.3

Germany

XETRA DAX

12282.6

-30.56

-0.2

Italy

MIB

21719.88

-4.56

0.0

Spain

Ibex 35

9501.2

44.80

0.5

Sweden

OMX Stockholm 30

1689.42

8.70

0.5

Switzerland

SMI

9694.06

38.39

0.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

*

*

*

Japan

Nikkei 225

22307.58

107.58

0.5

 

Topix

1620.28

8.23

0.5

Hong Kong

Hang Seng

29549.8

-256.03

-0.9

S. Korea

Kospi

2190.5

-10.53

-0.5

Singapore

STI

3350.28

-12.15

-0.4

China

Shanghai Comp

3123.83

-77.78

-2.4

Taiwan

TAIEX

11039.86

12.22

0.1

India

Sensex 30

38730.86

-323.82

-0.8

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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