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On 26 July 2019 - US, Europe better on earnings; Asia off

Anne D Picker

Anne D Picker - Econoday

Market eyes impact of better economic data on Fed rate cut plans.

US markets

US stocks rose Friday after a strong US GDP report, and on favorable quarterly earnings results, with a huge rally in Google leading communications services higher. Equities gains were limited by concern that better data might limit the Federal Reserve’s hand in cutting rates. The Dow industrials 0.2 percent, the S&P 500 rose 0.7 percent, and the NASDAQ gained by 1.1 percent.

Consumer staples outperformed, led by beverage, grocers, and food products. Financials also did well, led by banks. Health care underperformed, with weakness in medical technology, biotech, and pharma. Energy shares were laggards, with exploration and production firms the big losers.

Google soared 10.4 percent after reporting a rebound in website ad revenues, better margins, surging cloud computing business, plus a huge share buyback. Results for other big tech-oriented firms were mixed, with Amazon off 1.5 percent on weaker profitability due to rising delivery costs. Twitter rocketed 9 percent after an earnings beat. Dow member McDonalds rose 0.5 percent after reporting earnings in line with expectations, but same store sales well above expectations.

In economic news, personal consumption expenditures and government spending lifted US second-quarter GDP to a 2.1 percent annual rate that beat Econoday's consensus by 2 tenths. Beating Econoday's consensus by 4 tenths is inflation-adjusted consumer spending, which came in at a very hot 4.3 percent pace. This is directly tied to the strong labor market. Government purchases, here tied to heavy government spending, grew at a 5.0 percent pace. Consumer spending contributed 2.85 percentage points to the quarter's growth while government purchases contributed 0.85 points. All other major components pulled down GDP, which is what Federal Reserve policy makers, who are now biased strongly toward a rate cut, will have to underscore at their meeting next week.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude rose 15 cents to US$63.30 while gold rose US$3.40 to US$1417.80. The US dollar rose against most major currencies. The yield on the US Treasury 30-year bond yield was down 2 basis points at 2.59 percent while the yield on the 10-year note was down 1 basis point at 2.07 percent.

European markets

European equities rose Friday on earnings results, with telecom and media shares leading the way. The Europe-wide STOXX 600 gained 0.3 percent, the German DAX was up 0.5 percent, the French CAC rose 0.6 percent, and the UK FTSE 100 rose 0.8 percent.

Vodaphone rose 11.6 percent on plans to spin off its towers business, and expand its 5G offerings. Telecom Italia was up 4.1 percent on news of its joint 5G rollout with Vodaphone. Among media shares, Vivendi was up 3 percent, and Pearson rose 5.4 percent, both on positive earnings surprises.

Media, telecom, and food and beverages outperformed, while retail, miners, and real estate underperformed in the Euro Stoxx 600. Among other top names reporting results, chocolatier Nestle rose 1.5 percent after reporting stronger earnings and fast sales growth. Building materials company Saint-Gobain rose 1.2 percent on a positive earnings surprise, amid cost cutting. Tiremaker Michelin was off 2.7 percent on an earnings miss despite better revenues.

In economic news, French producer prices fell for a fourth successive month in June. A 0.5 percent monthly slide reduced annual PPI inflation to just 0.2 percent, its lowest reading since November 2016. Separately, Italian business confidence improved in July. A near-2 point bounce versus an unrevised June outturn put the Istat measure at 101.2, its highest since last October. However, the headline gain was not mirrored in manufacturing where morale declined a further 0.6 points to 100.1.

Asia Pacific Markets

Most major Asian markets closed Friday moderately lower on the day but held onto gains over the week. The regional data calendar was light Friday, keeping much of the focus on the outlook for US and European monetary policy. The Nikkei and Topix indices fell 0.5 percent and 0.4 percent on the day, respectively, and finished the week up 0.9 percent and 0.5 percent, respectively, while Australia’s All Ordinaries index fell 0.3 percent on the day and outperformed on the week with a 1.3 percent gain. Hong Kong’s Hang Seng index was the weakest major market both on the day and the week, down 0.7 percent and 1.3 percent respectively, with ongoing political unrest still weighing on sentiment. The Shanghai Composite index was the main exception to market declines Friday, rising 0.2 percent on the day and advancing 0.5 percent on the week.

Singapore's manufacturing output fell 6.9 percent on the year in June after falling 2.0 percent in May and rose 1.2 percent on the month after falling 0.1 percent previously. Industrial production has now fallen on the year for four consecutive months and did so in June at the fastest pace since December 2015, in line with similar results for Singapore's exports over this period. Excluding the volatile biomedical industry, manufacturing output fell 9.9 percent on the year in June after dropping 4.6 percent in May and fell 2.9 percent on the month after dropping 2.2 percent previously.

Looking forward

Central Bank activities

Jul-29

Japan

Bank of Japan policy announcement

Jul-31

US

FOMC policy announcement and Fed chair press conference

Aug-01

UK

BOE policy announcement and minutes

Aug-02

Japan

Bank of Japan MPB minutes

The following indicators will be released this week...

Europe

Jul-30

Eurozone

EC Economic Sentiment (July)

 

France

Consumer Mfgd Goods Consumption (June)

 

 

GDP Flash (Q2)

 

Germany

CPI (July)

 

 

Gfk Consumer Climate (August)

 

Switzerland

KOF Swiss Leading Indicator (July)

Jul-31

Eurozone

GDP Flash (Q2)

 

 

HICP Flash (July)

 

 

Unemployment Rate (June)

 

France

CPI (July)

 

Germany

Retail Sales (June)

 

 

Unemployment Rate (July)

 

Italy

CPI (July)

 

 

GDP (Q2 preliminary)

Aug-01

Eurozone

PMI Manufacturing Index (July)

 

Germany

PMI Manufacturing Index (July)

 

UK

CIPS/PMI Manufacturing Index (July)

Aug-02

Eurozone

PPI June)

 

 

Retail Sales (June)

 

Italy

Industrial Production (June)

 

 

Retail Sales (June)

 

Switzerland

Adjusted Retail Sales (July)

 

 

CPI (July)

 

UK

PMI Construction (July)

Asia Pacific

Jul-30

Japan

Industrial Production (June)

 

 

Retail Sales (June)

 

 

Unemployment Rate (June)

Jul-31

Australia

CPI (Q2)

 

China

CFLP Manufacturing PMI (July)

 

Hong Kong

GDP (Q2)

Aug-01

China

PMI Manufacturing Index (July)

 

India

PMI Manufacturing Index (July)

 

Japan

PMI Manufacturing Index (July)

Aug-02

Australia

Retail Sales (July)

Americas

Jul-30

US

Consumer Confidence (July)

 

 

Pending Home Sales Index (June)

 

 

Personal Income and Outlays (June)

 

 

S&P Corelogic Case-Shiller HPI (May)

Jul-31

Canada

Monthly GDP (May)

 

US

ADP Employment (July)

 

 

Chicago PMI (July)

 

 

Employment Cost Index (Q2)

Aug-01

US

Construction Spending (June)

 

 

ISM Manufacturing (July)

 

 

Jobless Claims (Week of July 27)

 

 

PMI Manufacturing Index (July)

Aug-02

Canada

Merchandise Trade (June)

 

US

Consumer Sentiment (July flash)

 

 

Employment Situation (July)

 

 

Factory Orders (June)

 

 

International Trade (June)

Global Stock Markets

 

Index

26 Jul 2019

Daily Change

% Change Daily

North America

United States

Dow

27192.45

51.47

0.2

 

NASDAQ

8330.21

91.67

1.1

 

S&P 500

3027.55

21.27

0.7

Canada

S&P/TSX Comp

16534.1

50.84

0.3

Europe

UK

FTSE 100

7549.06

60.01

0.8

France

CAC

5610.05

32.00

0.6

Germany

XETRA DAX

12419.9

57.80

0.5

Italy

MIB

21837.74

-65.55

-0.3

Spain

Ibex 35

9225.5

-64.40

-0.7

Sweden

OMX Stockholm 30

1610.64

3.44

0.2

Switzerland

SMI

9968.08

91.05

0.9

Asia/Pacific

Australia

All Ordinaries

6879.35

-22.50

-0.3

Japan

Nikkei 225

21658.15

-98.40

-0.5

 

Topix

1571.52

-6.33

-0.4

Hong Kong

Hang Seng

28397.74

-196.56

-0.7

S. Korea

Kospi

2066.26

-8.22

-0.4

Singapore

STI

3363.76

-17.50

-0.5

China

Shanghai Comp

2944.54

7.18

0.2

Taiwan

TAIEX

10891.98

-49.43

-0.5

India

Sensex 30

37882.79

51.81

0.1

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.