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On 26 August 2019 - US, Europe better as trade worries ease; Asia falls

Anne D Picker

Anne D Picker - Econoday

Trump says China asks to resume trade negotiations.

US markets

Major US stock indexes recovered a portion of their recent losses Monday after President Trump said a Chinese official had telephoned the US side seeking to resume trade talks. Trump added that China has no choice but to reach a trade pact, and hinted the latest US tariff increases could be scrapped. The Dow industrials rose 1.1 percent, the S&P 500 was up 1.1 percent, the NASDAQ gained 1.3 percent, and the Russell 2000 gained 1.2 percent. 

Regarding Trump’s statement, a Chinese Foreign Ministry spokesman reportedly said he was not aware of any weekend calls. Hu Xijin, the editor of China’s Global Times, also said top US and Chinese negotiators did not hold phone talks recently, and that contacts continue only at the technical level.

Communications services led the session's gains including Facebook, up 1.5 percent, Google, up 1.5 percent, and Netflix, up 1.3 percent. Other leaders included telecom, media, and consumer staples. Restaurants and home builders were laggards, along with health care, industrials and energy the latter as oil prices fell. 

Among companies in focus, ride share company Lyft rose 4.3 percent on an upgrade by Guggenheim Securities. Big pharma Bristol Myers Squibb rose 3.4 percent on news of regulatory approval for its acquisition of Celgene, a biotech firm which was up 3.2 percent.

In economic news, US durable goods total orders jumped 2.1 percent as orders for civilian aircraft jumped 49 percent following June's 101 percent gain that followed a run of weakness. Motor vehicle orders were also solid in July, up 0.5 percent to extend their run of strength. Excluding civilian aircraft and vehicles as well as all other transportation equipment, durable goods orders disappointed with a 0.4 percent July decline.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil fell 51 cents to US$58.83, while gold rose US$0.50 to US$1,538.10. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield rose 1 basis point to 2.04 percent while the yield on the 10-year note was flat at 1.54 percent.

European markets

European equities were flat to higher Monday as sentiment improved on more constructive headlines in the US-China trade dispute. Activity was light due to a UK bank holiday. The Europe-wide STOXX 600 was unchanged while the German DAX rose 0.4 percent and French CAC rose 0.5 percent.

Italian markets bounced up on news suggesting progress toward a new coalition government that might allow Giuseppe Conte to remain as prime minister. The FTSE MIB index ended up 1 percent.

Outperforming sectors in the Stoxx 600 included autos and parts, telecomm, construction and materials, and technology. Underperformers included health care, basic resources, and financial services. Among companies in the news, MDxHealth, a Belgian medical technology firm, surged 15 percent on news its cancer test would qualify for Medicare reimbursement. Klaveness, a Norwegian shipping company, rose 10 percent, and Akasol, a German battery maker, rose 5 percent on an earnings beats. On the downside, Swiss chemicals maker Ems Chemie fell 3.5 percent on an earnings miss. Deutsche Wohnen, a German property company, fell 3.4 percent on news Berlin could cap apartment rents at low levels. Vossloh, a German railroad equipment maker, fell 3.1 percent on news the company is selling its locomotive business.

In German economic news, Ifo's August survey found business sentiment deteriorating yet again. At 94.3, the headline climate index was 1.5 points short of July, well below the market consensus and at its weakest level since November 2012. The indicator has now fallen in five of the last six months and in eleven of the last twelve.

Asia Pacific markets

Asian markets closed Monday sharply lower, following the lead set by Wall Street on Friday. Developments at the G-7 summit over the weekend and into Monday reinforced investor concerns about US-China trade tensions, while news that the US and Japan had agreed to a new trade deal did little to improve sentiment. Civil unrest in Hong Kong escalated further over the weekend. Japan’s Nikkei index posted the largest fall in the region Monday, closing down 2.2 percent, with the Topix index falling 1.6 percent. The Shanghai Composite index fell 1.2 percent, Hong Kong’s Hang Seng index dropped 1.9 percent, and Australia’s All Ordinaries index closed down 1.3 percent. 

Trade data were the main focus of the regional data calendar Monday. Hong Kong exports fell 5.7 percent on the year in July, an improvement on the 9.0 percent drop in June but providing further evidence that weak external demand is dragging down growth across the region. Exports to mainland China and the US were again weak, but a bigger drop in imports resulted in a smaller trade deficit. New Zealand’s trade balance shifted from surplus to deficit in July, with year-on-year export growth moving into negative territory but imports rebounding sharply on the year, partly due to a spike in aircraft imports. Exports to China, Australia, and Japan were positive, but this was outweighed by year-on-year declines in exports to the US and several Asian trading partners.

Consistent with weakness in exports in recent months, Singapore's industrial production fell on the year in July for the fourth time in the last five months, though the drop of 0.4 percent was less pronounced than the 8.1 percent fall seen previously. Improvement in headline growth was mainly driven by a smaller year-on-year decline in electronics production, offset by weaker growth in biomedical output.

Looking forward

On Tuesday in Asia industrial profits from China will be posted. In Europe, the French business climate indicator, and German GDP reports are due while in the US, Case-Shiller and FHFA home prices and consumer confidence are due.

Global stock markets

 

Index

26 Aug 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

25898.83

269.93

1.1

 

NASDAQ

7853.73

101.96

1.3

 

S&P 500

2878.38

31.27

1.1

Canada

S&P/TSX Comp

16098.79

61.21

0.4

Europe

 

 

 

 

UK

FTSE 100

*

*

*

France

CAC

5351.02

24.15

0.5

Germany

XETRA DAX

11658.04

46.53

0.4

Italy

MIB

20676.83

202.97

1.0

Spain

Ibex 35

8679.2

29.70

0.3

Sweden

OMX Stockholm 30

1520.85

-2.00

-0.1

Switzerland

SMI

9715.83

-29.15

-0.3

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6531.01

-83.31

-1.3

Japan

Nikkei 225

20261.04

-449.87

-2.2

 

Topix

1478.03

-24.22

-1.6

Hong Kong

Hang Seng

25680.33

-499.00

-1.9

S. Korea

Kospi

1916.31

-31.99

-1.6

Singapore

STI

3065.33

-45.02

-1.4

China

Shanghai Comp

2863.57

-33.86

-1.2

Taiwan

TAIEX

10354.57

-183.54

-1.7

India

Sensex 30

37494.12

792.96

2.2

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.