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On 29 May 2019 - Global stocks fall sharply: rare metals new chip in US-China trade war

Anne D Picker

Anne D Picker - Econoday

Canada holds policy steady, German unemployment rises.

US markets

China's play on rare metals made for heavy selling in US shares on Wednesday. The Dow fell 0.9 percent with the Nasdaq down 0.8 percent.

State media reported that China is considering restricting exports to the US of rare metals which are key components in electronics. The news marks a ratcheting higher of tensions.

Other news included the first public comments from US Special Counsel Robert Mueller who said that charging Donald Trump "was not an option" of his investigation. Mueller did not exonerate Donald Trump of obstruction of justice but did say there was no collusion with Russia.

Out of Canada, the central bank kept rates unchanged though policy makers did note that the economic slowdown late last year and early this year appears to have been temporary and that ongoing strength in the jobs market suggests that businesses also see the slowdown as temporary. The S&P/TSX fell 1.0 percent.

In financial news, State Street reported that global institutional investors continued to reduce their exposure to global equities during May but nevertheless were less risk averse than in April. The investor confidence index rose to 79.5, up 6.6 points from April and reflecting improved sentiment in North America and Europe though global investors in Asia grew more cautious.

These data reflect observations at 4:00 PM US ET. Dated Brent spot crude was down US$0.50 to $69.45 while gold was US$0.90 higher at $1,279.50. The US dollar rose against the euro, the yen, the pound, the Australian and Canadian dollars, and the yuan; it was little changed against the Swiss franc. The yield on the US Treasury 30-year bond fell 2 basis points to 2.69 percent while the yield on the 10-year note was down 1 basis point to 2.26 percent.

European markets

Weak jobs data out of Germany combined with losses in Asia to push European share prices sharply lower. France's CAC fell 1.7 percent with Germany's DAX down 1.6 percent. The FTSE lost 1.2 percent.

The German labor market showed signs of cracking in May. In sharp contrast to expectations for yet further improvement, the number of people out of work jumped 60,000 to 2.279 million. This was large enough to add 1 tenth to the jobless rate which, at 5.0 percent, is still within touching distance of April's post-Reunification low. Definitional changes did play a part in April's results but a clear negative was a further decline for vacancies.

Also soft was the KOF leading economic indicator out of Switzerland. At 94.4, the measure fell 1.8 points in May to a 3-month low and is pointing to sluggish going for the next quarter or two. Conditions in May deteriorated for banking and insurance, consumption and foreign demand. The Swiss market index fell 1.4 percent on the day.

In a technical glitch in early trading, the pan-European industrial goods and services index surged more than 4 percent. Index provider STOXX attributed the brief jolt to pricing problems for UK building materials supplier Howden Joinery, shares of which rose sharply on the day.

Asia Pacific Markets

Asian equity markets remained depressed Wednesday, as the US-China trade dispute dragged on and traders anticipated more trade disruptions, a global slowdown, and a profits recession.  The Shanghai composite managed a modest 0.2 percent rise, based on bargain-hunting in the insurance sector that offset weakness in most sectors. The narrower CSI 300 blue chip Chinese index fell 0.2 percent. Rare earth prices and related shares rallied on Chinese media reports pointing to a likely ban in rare earth exports to the US as retaliation against US trade sanctions.

Hong Kong's Hang Seng index fell 0.6 percent, with particular weakness in energy, IT, financial, and property shares. Japan's Nikkei 225 fell 1.2 percent in a risk-off move, with construction machinery, capital goods makers, and financials leading the selloff. Singapore's Straits Times index was marginally weaker at down 0.06 percent, with DBS Holdings leading financials also down. Korea's KOSPI fell 1.2 percent, giving up all its 2019 gains, led by declines in cyclicals as growth prospects and profit expectations are being scaled back. Tech stocks fell with heavy-weight Samsung Electronics down 1.8 percent.

India's BSE Sensex declined 0.6 percent, with softness centered in financials and commodities-linked shares, including State Bank of India and JSW Steel, both down 4 percent. Australia's All Ordinaries index eased by 0.7 percent on worries over a slowdown in demand for Australian commodities. Mining and energy shares both fell 0.7 percent, as oil and iron prices dropped. Rare earth stocks rallied on the Chinese threat against the US.

Looking forward

Australian capital spending will be the only major data from either Asia or Europe. In the US, the second estimate for GDP will update the first quarter while international trade in goods will update trade conditions in April. Pending sales of existing homes will also be posted in the US.

Global Stock Markets

 

Index

29 May 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

25126.41

25347.77

-0.9

 

NASDAQ

7547.31

7607.35

-0.8

 

S&P 500

2783.02

2802.39

-0.7

Canada

S&P/TSX Comp

16131.47

16297.46

-1.0

Europe

 

 

 

 

UK

FTSE 100

7185.3

7268.95

-1.2

France

CAC

5222.12

5312.69

-1.7

Germany

XETRA DAX

11837.81

12027.05

-1.6

Italy

MIB

19999.94

20260.98

-1.3

Spain

Ibex 35

9080.5

9191.80

-1.2

Sweden

OMX Stockholm 30

1538.75

1565.12

-1.7

Switzerland

SMI

9541.97

9680.87

-1.4

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6536.62

6580.39

-0.7

Japan

Nikkei 225

21003.37

21260.14

-1.2

 

Topix

1536.41

1550.99

-0.9

Hong Kong

Hang Seng

27235.71

27390.81

-0.6

S. Korea

Kospi

2023.32

2048.83

-1.2

Singapore

STI

3163.28

3165.32

-0.1

China

Shanghai Comp

2914.7

2909.91

0.2

Taiwan

TAIEX

10301.78

10312.31

-0.1

India

Sensex 30

39502.05

39749.73

-0.6

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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