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On 28 January 2019 - Global stocks down after Asian data and company news stoke growth concerns

Anne D Picker

Anne D Picker - Econoday

European markets were weighed down by the sharp fall in multinational miner Vale following a mining disaster at one of its operations in Brazil.

US markets

US stocks fell Monday after company announcements renewed concerns among investors about global growth. The Dow closed 0.8 percent lower on the day, as did the S&P, while the Nasdaq dropped 1.1 percent.

Heavy-equipment manufacturer Caterpillar closed well down after announcing weaker-than-expected fourth quarter earnings and guidance. Although its revenue was close to expectations, the company noted that sales had been impacted by weaker growth in China, which the company estimates represents 5 to 10 percent of its business. Higher trade tariffs were also identified as a factor pushing up costs. Fourth-quarter adjusted earnings per share were US$2.55, falling short of analysts’ expectations of US$2.99. The company also expects growth in its China business will be “roughly flat” in 2019 after two years of significant growth.

Chip manufacturers were also among the worst performers, led by a sharp fall in NVIDIA after it lowered its fourth-quarter revenue guidance down from US$2.7 billion to US$2.2 billion. The company citied “deteriorating macroeconomic conditions” for the downgrade, with a particular focus on weaker demand from China. Rival producer AMD also fell ahead of its fourth-quarter earnings announcement later in the week.

Federal Reserve indicators were the main highlights of a light US data calendar Monday. The Chicago Fed’s national activity index increased from 0.22 in November to 0.27 in December, well above the consensus for a fall to 0.15. Stronger growth in manufacturing output was the main factor driving the headline improvement. The Dallas Fed’s regional manufacturing survey also a rebounded in conditions, with the general activity index increasing from the multi-year low of minus 5.1 in December to 1.0 in January, with an increase in the production index outweighing declines in other components.

With the US government now re-opened, the Congressional Budget office has published an assessment estimating that the shutdown will have had only a negligible effect on economic growth, consistent with the view of Federal Reserve Chairman Jerome Powell that shutdowns generally have little lasting impact. Officials have advised however that the release of upcoming economic data, including the advance GDP report, will be delayed.

These data reflect observations at 4:00 PM US ET. Gold gained US$5.30 to US$1,309.50 and dated Brent spot crude was down US$1.57 to US$60.07. The US dollar made moderate gains against the pound, the Australian dollar, and the Canadian dollar, was flat against the yuan, and weakened slightly against the yen, the euro, and the Swiss franc. The yield on the US Treasury 30 year bond was down a basis point at 3.06 percent while the 10 year note fell 2 basis points to 2.74 percent.

European markets

European stocks closed lower Monday, with Caterpillar’s earnings announcement late in the session weighing on investor sentiment. The FTSE closed 0.9 percent lower on the day, the CAC lost 0.8 percent and the DAX fell 0.6 percent.

Weakness in European markets was partly driven by a sharp fall in multinational miner Vale, listed on the stock exchanges of São Paulo, New York, Paris and Madrid, after a mining disaster at one of its operations in Brazil last Friday resulted in dozens of deaths. Authorities fear the death toll will rise further. Brazil’s acting president Hamilton Mourão has announced that the government will consider changing senior management at Vale in response to the disaster.

Ahead of Tuesday’s vote by the United Kingdom parliament on the government’s revised Brexit deal, the issue of the land border between the UK and the Republic of Ireland remains the main obstacle to agreement. Officials from the UK government and the European Union have reiterated their commitment to ensuring that this border remains open and easily crossed, but Brexit supporters remain concerned that this will leave parts or all of the UK within the EU’s customs union indefinitely.

Asia Pacific Markets

Most Asian markets closed lower or flat Monday after the release of weak regional data. India’s SENSEX index was the worst regional performer, down 1.0 percent on the day, while Japanese markets also underperformed, with the Nikkei down 0.6 and the Topix down 0.7 percent. The Shanghai Composite index fell 0.2 percent on the day, as did Singapore’s STI, with markets in Hong Kong and Korea little changed. Markets were closed in Australia for Australia Day.

Russian aluminium producer Rusal, listed on the Hong Kong stock market, closed sharply higher Monday after the US Treasury lifted sanctions imposed last year because of the company’s close ties with the Russian government. Officials concluded that recent changes to the company’s ownership had reduced the Russian government’s influence sufficiently, with the company also announcing that its chairman has resigned as part of the deal to lift sanctions.

Chinese data published Monday showed industrial profits fell on the year for a second consecutive month in December, providing further evidence that conditions remain challenging for domestic firms. Hong Kong also reported weaker growth in both exports and imports in December, with officials pointing to a bigger impact from recent trade tensions between China and the United States.

Looking forward

The FOMC meeting begins Tuesday ahead of a decision Wednesday. US trade data and some consumer-focused indicators are also scheduled for release. The United Kingdom parliament will vote on the government’s revised Brexit deal.

Global Stock Markets

 

Index

28 Jan 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

24528.22

-208.98

-0.8

 

NASDAQ

7085.69

-79.17

-1.1

 

S&P 500

2643.85

-20.91

-0.8

Canada

S&P/TSX Comp

15378.62

12.57

0.1

Europe

 

 

 

 

UK

FTSE 100

6747.10

-62.12

-0.9

France

CAC

4888.58

-37.24

-0.8

Germany

XETRA DAX

11210.31

-71.48

-0.6

Italy

MIB

19608.13

-202.39

-1.0

Spain

Ibex 35

9062.40

-122.80

-1.3

Sweden

OMX Stockholm 30

1491.01

-10.11

-0.7

Switzerland

SMI

8857.85

-64.64

-0.7

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

*

*

*

Japan

Nikkei 225

20649.00

-124.56

-0.6

 

Topix

1555.51

-10.59

-0.7

Hong Kong

Hang Seng

27576.96

7.77

0.0

S. Korea

Kospi

2177.30

-0.43

0.0

Singapore

STI

3196.46

-5.79

-0.2

China

Shanghai Comp

2596.98

-4.74

-0.2

Taiwan

TAIEX

10013.33

43.72

0.4

India

Sensex 30

35656.70

-368.84

-1.0

* Market closed
Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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