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On 25 September 2019 - Global shares: US recovers on trade hopes; Europe, Asia off on impeachment worry

Anne D Picker

Anne D Picker - Econoday

Risk-on sentiment returns; Trump trade comment renews talk of US-China deal.

US markets

US equities rebounded Wednesday on better hopes for US-China trade, including President Trump’s comment that a trade deal could happen soon. The Dow industrials and S&P 500 both rose 0.6 percent, and the NASDAQ gained 1.1 percent.

Equities markets recovered from early losses on the Trump comment, and after US Trade Representative Robert Lighthizer said the two sides remain engaged in talks. Markets also gained on skepticism that the House impeachment inquiry would lead to Trump’s removal, and on Ukrainian President Zelensky’s comment, during an appearance with Trump, that the US leader did not press him in their July telephone call. Upbeat US new home sales data contributed to the better risk mood, though energy shares were hurt by another oil market selloff after bearish inventories data.

Tech shares led the gains on the trade news, with chip stocks outperforming. Other leaders included tobacco, apparel, trucking, banks, and autos. Health care lagged especially pharma, with utilities and real estate also underperforming.

Among companies in focus, Nike rallied 4.2 percent on strong earnings and sales growth. Altria, off 0.4 percent, and Philip Morris, up 5.2 percent,, reacted after the big tobacco companies called off merger talks. Best Buy, the retailer, declined 0.4 percent after announcing cost cuts.

In US economic news, new home sales are pivoting higher, at a 713,000 annual rate in August that topped Econoday's consensus range. Underscoring the strength was a sharp upward revision to July to a 666,000 rate that helped lift the 3-month average to 703,000 which is the best showing for the average since October 2007 and just before the subprime collapse. Separately, crude oil inventories rose 2.4 million barrels in the September 20 week to 419.5 million, 5.9 percent above their level last year at this time. The crude oil build was larger than the increase of 1.4 million barrels reported Tuesday by the American Petroleum Institute.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 19 cents to US$62.37, while gold dropped by US$38.40 to US$1,512.40. The US dollar rose against most major currencies. The US Treasury 30-year bond yield rose 7 basis points to 2.18 percent while the 10-year note yield was up 8 basis points to 1.73 percent.

European markets

European equities slipped Wednesday on carryover from weakness overnight on President Trump’s hawkish China rhetoric, and news that impeachment proceedings would begin against Trump. The Europe-wide STOXX 600 and the German DAX both fell 0.6 percent, the French CAC fell 0.8 percent, and the exporter-heavy UK FTSE-100 was flat.

The FTSE 100 outperformed, with exporters better on sterling weakness amid ongoing uncertainty over Brexit. Prime Minister Boris Johnson pressed for new elections but lacked the votes after the Supreme Court forced Parliament to reconvene. The FTSE 250, made up of mid-cap shares, fell 0.7 percent, in a reflection of the market’s view of domestic business conditions.

Among shares in the Stoxx 600, leaders to the downside included: oil & gas, travel & leisure, food & beverages, and personal & household goods. Outperformers included telecom, autos & parts, and industrial goods & services.

Among companies in focus, UK supermarket Sainsbury’s rose 1.6 percent after announcing cost-cutting measures. UK fashion retailer boohoo Group gained 0.6 percent after reporting strong sales and profits growth. In M&A news, Osram Licht, the German lighting manufacturer, rose 2.6 percent on word it would be acquired by a US private equity firm.

Asia Pacific markets

Major Asian markets closed lower Wednesday with regional investors, following the lead set by Wall Street Tuesday, indicating concern about US political developments as Congress launched a formal impeachment inquiry into President Trump. Ongoing concerns about US-China trade developments also weighed on sentiment. Hong Kong’s Hang Seng index was among the weaker performers in the region, closing down 1.3 percent, while the Shanghai Composite index and Australia’s All Ordinaries index fell 1.0 percent and 0.6 percent respectively. Japanese shares posted smaller declines, with the Nikkei index down 0.4 percent on the day and the Topix index down 0.2 percent.

The Reserve Bank of New Zealand left its policy rate, the overnight cash rate (OCR), unchanged at a record low of 1.00 percent, in line with the consensus forecast. Officials expressed confidence that growth would strengthen and inflation would increase gradually to around the mid-point of their 1.0 percent to 3.0 percent target range, but they also noted that there remains scope to cut rates further “if necessary”. Officials in recent months have demonstrated a preference to adjust policy rates after the release of quarterly employment and inflation data, with rates cut in May, left on hold in June, cut again in August, and now left on hold again in September. This suggests that another rate cut may happen at the RBNZ's next policy meeting in November after the release of inflation and employment data for the three months to September. Also published Wednesday, New Zealand trade data showed the trade deficit widened from NZ$700 million in July to NZ$1,565 million in August, in line with normal seasonal patterns and very close to the deficit recorded twelve months earlier.

The Bank of Japan published the minutes of its July meeting. Policy settings were left unchanged at that meeting, and left unchanged again at the subsequent meeting held last week. In line with comments made by BoJ Governor Haruhiko Kuroda after the July meeting, the minutes confirm that officials agreed that they would not hesitate to ease policy further if “momentum" toward meeting their inflation target was “lost”. Officials last week advised that "it is becoming necessary to pay closer attention to the possibility” that this momentum will be lost. Speaking earlier this week, Governor Kuroda said that he is "more positive about further easing" but has "no preconception" ahead of the next policy meeting scheduled for late October.

Looking forward

On Thursday in Asia/Pacific data, Hong Kong merchandise trade and Singapore industrial production reports are scheduled. In Europe, Eurozone M3 and German Gfk consumer climate reports are due. In North America, international trade in goods, revised GDP, jobless claims, pending home sales and weekly natural gas inventories are due.

Global stock markets

 

Index

25 Sep 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26970.71

162.94

0.6

 

NASDAQ

8077.38

83.75

1.1

 

S&P 500

2984.87

18.27

0.6

Canada

S&P/TSX Comp

16784.29

-14.04

-0.1

Europe

 

 

 

 

UK

FTSE 100

7289.99

-1.44

0.0

France

CAC

5583.8

-44.53

-0.8

Germany

XETRA DAX

12234.18

-72.97

-0.6

Italy

MIB

21788.22

-112.79

-0.5

Spain

Ibex 35

9085.3

-32.90

-0.4

Sweden

OMX Stockholm 30

1620.67

-12.42

-0.8

Switzerland

SMI

9914.82

-76.49

-0.8

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6814.69

-41.90

-0.6

Japan

Nikkei 225

22020.15

-78.69

-0.4

 

Topix

1620.08

-2.86

-0.2

Hong Kong

Hang Seng

25945.35

-335.65

-1.3

S. Korea

Kospi

2073.39

-27.65

-1.3

Singapore

STI

3125.82

-29.64

-0.9

China

Shanghai Comp

2955.43

-29.91

-1.0

Taiwan

TAIEX

10873.69

-44.32

-0.4

India

Sensex 30

38593.52

-503.62

-1.3

Note: all releases are listed in local time.

Important Information

Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.