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On 26 June 2019 - Global shares: US, Europe, Asia mostly weaker on uncertain US-China trade picture

Anne D Picker

Anne D Picker - Econoday

Disappointment over Fed posture weighs on stocks, though risk appetite better.

US markets

US equities ended mostly flat to lower Wednesday after giving up early gains as markets keyed on news about a possible US-China trade accord. Markets rose in the morning after Treasury Secretary Steven Mnuchin said a deal was nearly 90 percent complete, though he did not provide details. President Trump said a pact was possible after talks with Chinese President Xi later this week, but that he was fine with imposing more tariffs on almost all Chinese exports.

Other reports suggested the US was willing to delay imposing more tariffs if trade talks resume, but it was unclear whether they would. Stocks ended at their lows of the day.

Sentiment remained damaged by disappointment over Fed Chair Jerome Powell’s comments that the Fed is still assessing whether rate cuts are needed. Trump kept up the pressure on the Fed to ease by attacking Powell again Wednesday, saying he was “doing a bad job,” and that ECB President Mario Draghi would make a better Fed chair.

The Dow industrials eased by a marginal 0.04 percent; the S&P 500 eased 0.1 percent, and the NASDAQ rose 0.3 percent.

Tech shares and industrials fared better as the risk mood improved on hopes for a trade deal. Amazon (up 1 percent), Apple (up 2.3 percent), and Microsoft (up 0.4 percent) led the way higher, along with chipmakers including Advanced Micro Devices (up 3.7 percent), and Intel (up 3.1 percent). Energy shares rose as oil rallied on supportive oil stocks data. ConocoPhillips was a leader, up 4.8 percent, with help from a ratings upgrade.

General Mills was a big loser, off 4 percent, on a quarterly sales miss. Health care shares did badly, with Pfizer off 1.6 percent, and Merck off 1.8 percent.

Among companies in focus: chipmaker Micron rallied 13 percent on news it predicted rising demand for memory chips. Micron also said it had found a way around the ban on sales of memory chips to Huawei. The firm said “a subset” of its products were not subject to the US rules on exports to the Chinese telecom firm. Blackberry sank 9 percent after reporting weak sales.

In economic news, US durable goods orders fell 1.3 percent, but the headline masked modest underlying strength. Excluding transportation equipment, specifically a second straight drop in civilian aircraft orders and a sharp May drop in orders of motor vehicles, durable goods orders rose 0.3 percent, just above Econoday's consensus range. Core capital goods orders (nondefense ex-aircraft) came in on the high end of expectations at a 0.4 percent gain. Separately, the US deficit in cross-border goods trade came in at a much deeper-than-expected $74.6 billion masking, however, a strong 3.0 percent rise in exports to $140.2 billion. But imports outmatched the rise with a 3.7 percent increase to $214.7 billion.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was up US$1.24 at US$66.29 while gold fell by US$5.10 at $1413.60. The US dollar was up slightly against most major currencies. The yield on the US Treasury 30-year bond was up 3 basis points at 2.55 percent while the yield on the 10-year note was up 6 basis points at 2.05 percent.

European markets

European equities ended mixed to lower Wednesday, largely on ongoing bearish reaction to Fed Chair Powell’s comments, and uncertainty over prospects for a US-China trade deal.

The European STOXX 600 fell 0.3 percent, the German DAX rose 0.1 percent, the French CAC fell 0.3 percent, and the UK FTSE 100 eased 0.1 percent.

Cyclicals including oil and gas, autos, and banks outperformed, while defensive stocks such as real estate, health care and utilities underperformed, as some positive noises from the US side on trade improved risk appetite slightly.

In healthcare, weakness was focused in pharma and biotech. Sanofi, down 1.7 percent, said it would not hold a scheduled investor event. Novartis, down 1.1 percent, was in focus on concerns over a US federal court limiting sales of generic drugs. Banks outperformed as rate cut expectations have been scaled back after Fed’s Powell comments Tuesday. Raiffeisen, an Austrian bank, was up 3.6 percent. Barclays was up 1.6 percent.

In economic news, Germany’s GfK consumer confidence continued to deteriorate. The June reading was confirmed at 10.1, down 0.1 versus May and some 0.7 short of its recent February peak.

Asia Pacific Markets

Most major Asian markets closed lower Wednesday, with the direction set by US stocks Tuesday the main driver of regional price action. Japanese markets were among the weakest in the region, with the Nikkei and Topix indices closing down 0.5 percent and 0.6 percent respectively, largely driven by major exporters including Honda, Canon, and Toyota. The Shanghai Composite index fell 0.2 percent on the day while Hong Kong’s Hang Seng index recorded a modest 0.1 percent gain. Australia’s All Ordinaries index fell 0.3 percent.

The regional data calendar was light Wednesday. The Reserve Bank of New Zealand left its policy rate on hold at a record low of 1.50 percent after cutting it by 25 basis points at its previous meeting in May. Officials highlighted downside risks to the New Zealand economy from weaker global growth and trade tensions but noted that monetary and fiscal policy would provide some support to domestic activity. Although officials concluded that no further cut in rates was required at Wednesday's meeting, the case for a rate cut was discussed and officials agreed that more support from monetary policy was likely to be necessary. Singapore data also released Wednesday showed weaker industrial production growth in May, mainly driven by a sharp year-on-year fall in electronics output.

Looking forward

On Thursday, Australian CPI data are due. In Europe, Eurozone economic sentiment, German CPI, and Italian business and consumer confidence reports are due. In the US, the third estimate of first-quarter GDP will be released as will pending home sales.

Global Stock Markets

 

Index

26 Jun 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26536.82

-11.40

0.0

 

NASDAQ

7909.97

25.25

0.3

 

S&P 500

2913.78

-3.60

-0.1

Canada

S&P/TSX Comp

16312.22

-59.06

-0.4

Europe

 

 

 

 

UK

FTSE 100

7416.39

-6.04

-0.1

France

CAC

5500.72

-13.85

-0.3

Germany

XETRA DAX

12245.32

16.88

0.1

Italy

MIB

21057.14

-71.27

-0.3

Spain

Ibex 35

9157.4

-2.40

0.0

Sweden

OMX Stockholm 30

1604.23

-3.06

-0.2

Switzerland

SMI

9838.13

-60.77

-0.6

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6716.13

-18.41

-0.3

Japan

Nikkei 225

21086.59

-107.22

-0.5

 

Topix

1534.34

-9.15

-0.6

Hong Kong

Hang Seng

28221.98

36.00

0.1

S. Korea

Kospi

2121.85

0.21

0.0

Singapore

STI

3301.25

-3.02

-0.1

China

Shanghai Comp

2976.28

-5.79

-0.2

Taiwan

TAIEX

10652.55

-54.17

-0.5

India

Sensex 30

39592.08

157.14

0.4

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

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.