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On 25 June 2019 - Global shares: US down on Fed’s Powell, soft data; Asia, Europe off on geopolitics, trade tension

Anne D Picker

Anne D Picker - Econoday

Traders worry Powell comments suggest July rate cut not a done deal.

US markets

US equities slipped Tuesday as markets reacted to weak US economic data and comments from Fed Chair Jerome Powell that were not dovish enough to satisfy market expectations.

Powell said worries over trade and a global slowdown had darkened the economic outlook in recent weeks, but the Fed is still considering its options. “The question my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation," he said in prepared remarks. That was less than the full-throated call for near-term rate cuts than markets appeared to crave.

And Powell’s comments highlighting the Fed’s independence from political pressure were taken to suggest that policy-makers may delay rate cuts as a way of showing they will not cave to pressure from President Trump.

Equities were already weakening before Powell spoke at 1 pm ET in New York, partly on caution before upcoming US-China trade talks, and on worries about bellicose language from President Trump directed toward Iran, but also on news of big downside misses in US consumer confidence and new home sales.

The Conference Board cited "trade and tariff tensions" as a factor behind June's unexpected and very abrupt 10-point dip in consumer confidence to 121.5. And May's 626,000 annual rate for new home sales was far below April’s 679,000, and way below Econoday's consensus range of forecaster expectations. 

The Dow industrials fell 0.7 percent; the S&P 500 fell 1.0 percent, and the NASDAQ dropped 1.5 percent. 
Among companies in focus: health care was active on news that Abbvie (down 16 percent) would buy Allergan, the maker of Botox (up 26 percent). Other shares in focus included homebuilder Lennar (down 6 percent) after its earnings disappointed, and Grubhub, up 5 percent after an analyst upgrade.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude was up US$0.20 at US$65.06 while gold rose by US$2.55 at $1422.10. The US dollar was up slightly against most major currencies. The yield on the US Treasury 30-year bond was down 2 basis points at 2.53 percent while the yield on the 10-year note was down 2 basis points at 1.99 percent.

European markets

European equities mostly weakened Tuesday as traders fretted over possible US-Iran conflict and worries ahead of trade talks between President Trump and his Chinese counterpart expected later this week. Activity was tentative ahead of comments from Fed Chair Powell.

The European STOXX 600 eased by 0.1 percent, the German DAX fell 0.4 percent, the French CAC declined 0.1 percent, and the UK FTSE 100 rose 0.1 percent. 

Tech shares were lifted by news that Capgemini (up 8 percent) would buy Altran ( up 21 percent). Bank shares underperformed on expectations for falling interest rates. Barclays was off 0.9 percent, and Deutsche Bank was down 0.8 percent.

Economic news was weak. French manufacturing sentiment fell unexpectedly in June. At 102, INSEE's business climate indicator was 2 points short of its unrevised May reading to equal its lowest since June 2016.  In the UK, the Confederation of British Industry distributive trades index slumped to -42 from -27, its lowest level since October 2017.

Asia Pacific Markets

Asian markets sold off Tuesday, following the lead set by US markets on Monday but generally posting sharper declines as investors await this week’s G20 summit. Hong Kong’s Hang Seng index was the worst performer among major markets, down 1.1 percent on the day, with the Shanghai Composite index falling 0.9 percent. Japan’s Nikkei and Topix indices fell 0.4 percent and 0.3 percent respectively, while Australia’s All Ordinaries index closed down 0.2 percent.

Trade data was the main focus of the regional trade calendar Tuesday and provided further evidence that US-China trade tensions are having an impact on regional trade flows. Hong Kong’s exports fell 2.4 percent on the year in May after dropping 2.6 percent in April, with the data indicating and officials highlighting that US-China trade tensions were the main factor driving this weakness. Hong Kong’s imports also fell on the year. Year-on-year growth in New Zealand’s exports also moderated from 10.8 percent in April to 8.5 percent in May, though this was largely driven by weakness in exports to Australia. The Bank of Japan also published the minutes of its April meeting, but these provided little additional information on the policy outlook.

Looking forward

On Wednesday, the Reserve Bank of New Zealand will make its monetary policy announcement. In Europe, the German GfK Consumer Climate report is due. In the US, data on durable goods orders and international trade in goods will be released.

Global Stock Markets

 

Index

25 Jun 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26548.22

-179.32

-0.7

 

NASDAQ

7884.72

-120.98

-1.5

 

S&P 500

2917.38

-27.97

-0.9

Canada

S&P/TSX Comp

16371.28

-152.19

-0.9

Europe

 

 

 

 

UK

FTSE 100

7422.43

5.74

0.1

France

CAC

5514.57

-7.14

-0.1

Germany

XETRA DAX

12228.44

-46.13

-0.4

Italy

MIB

21128.41

-155.69

-0.7

Spain

Ibex 35

9159.8

-32.70

-0.4

Sweden

OMX Stockholm 30

1607.29

-3.65

-0.2

Switzerland

SMI

9898.9

0.05

0.0

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6734.54

-10.92

-0.2

Japan

Nikkei 225

21193.81

-92.18

-0.4

 

Topix

1543.49

-4.25

-0.3

Hong Kong

Hang Seng

28185.98

-327.02

-1.1

S. Korea

Kospi

2121.64

-4.69

-0.2

Singapore

STI

3304.27

-7.26

-0.2

China

Shanghai Comp

2982.07

-26.08

-0.9

Taiwan

TAIEX

10706.72

-72.73

-0.7

India

Sensex 30

39434.94

311.98

0.8

*Markets closed

 

 

 

Data Source —  Haver Analytics

 

 

 

Note: all releases are listed in local time.

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