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On 27 February 2019 - US stocks little changed as officials report US-China trade deal still needs work

Anne D Picker

Anne D Picker - Econoday

EU leaders indicate support for Brexit delay; Indian markets little changed after border dispute escalates.

US markets

US stocks were little changed Wednesday, with investor sentiment impacted on indications that a US-China trade deal remains elusive. The Dow closed down 0.3 percent, the S&P fell 0.1 percent, and the Nasdaq advanced 0.1 percent. Mylan NV posted a heavy fall after the drug-maker reported weaker-than-expected profits and downgraded its 2019 earnings guidance. Best Buy, however, surged after the electronics retailer posted stronger-than-expected sales and announced plans to buy back shares.

Congressional testimony was a key focus for markets Wednesday. US Trade Representative Robert Lighthizer provided an update on the recent US-China trade talks to the Ways and Means Committee but sounded a cautious note, noting that promises by China to purchase more US goods would not be enough to secure a trade agreement between the two countries. Federal Reserve Chairman Jerome Powell spoke to legislators for the second day in a row and provided some additional information about plans to end the runoff of the Federal Reserve’s asset portfolio. He reaffirmed his assessment that officials will be in a position to do this later this year and indicated that details will be announced soon. President Trump’s former lawyer, Michael Cohen, was also in Washington, accusing the president of misconduct in testimony to the House Oversight Committee.  

Factory orders rose 0.1 percent on the month in December, rebounding from a fall of 0.6 percent in November but falling short of the consensus forecast of 0.6 percent growth. Durable orders rose 1.2 percent on the month, unchanged from advance estimates, but this was offset by a 1.0 percent fall in nondurable orders. Excluding the impact of transportation goods, orders fell 0.6 percent on the month, while core capital goods orders (nondefense ex-aircraft) decreased 1.0 percent. Today’s data also revised down shipments of core capital goods from an advance estimate of a 0.5 percent increase to no change in what will be a negative for non-residential investment in Thursday's fourth-quarter GDP report.

Inventories data for December also published today showed relatively strong growth relative to sales at both the wholesale and retail level, providing upside for GDP growth in the current quarter but downside for growth in subsequent quarters.

Data on international trade in goods also will weigh on headline GDP for the quarter. The goods deficit widened from US$73.7 billion in November to US$79.5 billion in December, with exports falling 2.8 percent on the month and 0.3 percent on the year and imports increasing 2.4 percent on the month and 3.2 percent on the year. Services trade data and bilateral trade data will be published next week.

The National Association of Realtors’ pending home sale index rose 4.6 percent on the month in January after falling 2.3 percent in December, while a measure of mortgage applications also showed stronger growth in the week of February 22. The State Street Investor Confidence Index rebounded slightly in February after a sharp fall in January.

Canadian data showed a large fall in headline inflation from 2.0 percent in December to 1.4 percent in January, largely driven by weaker energy prices. Excluding food and energy, inflation fell from 2.3 percent in December to 1.9 percent in January with core measures unchanged. This stability in underlying price pressures suggests that today’s data will have little impact on the outcome of next week’s Bank of Canada policy meeting.

These data reflect observations at 4:00 PM US ET. Gold dropped US$6.90 to US$1,321.60 while dated Brent spot crude rose US$1.69 to US$66.31. The US dollar strengthened against the Australian dollar, the yen, the euro, and the Swiss franc, and weakened against the pound, the yuan, and the Canadian dollar. The yield on the US Treasury 30 year bond advanced 6 basis points to 3.071 percent while the 10 year note rose 5 basis points to 2.69 percent.

European markets

Most European markets closed lower Wednesday, with the FTSE down 0.6 percent, the CAC falling 0.3 percent and the DAX down 0.5 percent. Air France-KLM fell sharply after the Dutch government announced late Tuesday it had increased its ownership in the airline from 6.0 percent to 12.7 percent and is aiming to match the French government’s 14.3 percent stake in order to protect Dutch interests. Italy’s MIB index outperformed, up 0.2 percent on the day.

German Chancellor Angela Merkel said Wednesday that she would not object to a delay to the United Kingdom’s withdrawal from the European Union, though French President Emmanuel Macron said he would agree to such a delay only if there is a “clear objective”. Any decision to delay Brexit beyond the scheduled date of March 29 will require the approval of the UK and all EU member countries. The UK parliament is due to vote on a revised Brexit deal by March 12 and, if this deal is rejected, will be asked to vote on whether it wants the UK to withdraw on the scheduled date without a deal in place. If this no-deal option is rejected, parliament will then have a vote by March 14 on whether to seek to delay withdrawal.

The European data calendar was again light Wednesday. The European Union’s survey of economic sentiment showed a further small decline in February, with confidence picking up in services, retail and the household sector but weakening in industry and construction. Business inflation expectations weakened while household inflation expectations, though picking up moderately, also remain subdued. Measures of Italian business and consumer confidence also declined in February.

Asia Pacific Markets

Most Asian markets made moderate gains Wednesday, with Japan’s Nikkei and Topix indices closing up 0.5 percent and 0.2 percent respectively and the Shanghai Composite index and Australia’s All Ordinaries index both rising 0.4 percent. Hong Kong’s Hang Seng index underperformed after weak GDP data, closing down 0.1 percent.

Indian markets were relatively steady in response to the escalation of tensions between India and Pakistan in the last few days. The Sensex index closed down 0.2 percent Wednesday while the rupee has weakened moderately against the US dollar. Pakistani forces claim to have shot down two Indian military aircraft and to have captured a pilot along a disputed section of the border, with India confirming it has lost one aircraft and demanding the release of any detained personnel. 

Hong Kong data showed its economy contracted in the three months to December, with GDP falling by a seasonally adjusted 0.3 percent after increasing just 0.1 percent in the three months to September. Year-on-year growth slowed from 2.8 percent in the three months to September to 1.3 percent in the three months to December, the weakest growth since the start of 2016. Growth in consumer spending and business investment both weakened, offset partly by stronger government spending. Officials forecast economic growth of between 2.0 percent and 3.0 percent in 2019 after the economy recorded annual growth of 3.0 percent in 2018.

Looking forward

Japanese industrial production and retail sales data will be published shortly followed by Australian capital expenditure data, the official Chinese manufacturing PMI survey, and Indian GDP data. French GDP and inflation data are among the highlights of the European data calendar, with German and CPI also due for release. A busy US data calendar includes the GDP report, jobless claims data, Chicago and Kansas regional PMI surveys, and public comments from several Federal Reserve officials, including Vice Chairman Richard Clarida.

Global Stock Markets



Feb 27 2019

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S&P/TSX Comp






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Ibex 35





OMX Stockholm 30











All Ordinaries





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Sensex 30




Source: Haver Analytics

Note: all releases are listed in local time.

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