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On 29 August 2019 - Global shares: US, Europe up on hopes for trade talks, Asia narrowly mixed

Anne D Picker

Anne D Picker - Econoday

Tech, industrials lead stock gains in risk-on move.

US markets

Major US stock indexes perked up Thursday while US Treasuries fell, in a risk-on move spurred by headlines pointing to a resumption of US-China trade talks. The Dow industrials and S&P 500 both rose 1.3 percent, the NASDAQ 1.5 percent, and the Russell 2000 gained 1.6 percent. 

China’s Commerce Ministry reportedly said China and US officials are discussing face-to-face talks to be held in September but progress hinges on whether the US creates favorable conditions. President Trump told Fox News talks were ongoing, but did not provide details. Meanwhile, the US Federal Register made it official that an additional 5 percent tariff on $300 billion in Chinese goods is scheduled to take effect on Sunday.

The news on trade talks spurred buying in sectors most exposed to trade, including chipmaker Intel (up 2.3 percent), tech stocks like Apple (up 1.7 percent) and Microsoft (up 1.8 percent), and industrial shares like aerospace giant United Technologies (up 2.1 percent).

Retailer Best Buy dropped 8 percent on a quarterly earnings miss and downgraded guidance, including a warning about the impact of impending Chinese tariffs. Building supply retailer Home Depot rose 2.4 percent, in part due to expectations that a powerful Hurricane Dorian will make landfall in Florida. Among discount retailers, Dollar General rallied 10.7 percent as earnings and same-store sales topped expectations while Dollar Tree fell 2.0 percent on an earnings miss. Bank shares did better, including JP Morgan Chase, up 2.3 percent. 

Defensive shares fared relatively poorly, with telecom Verizon the sole Dow stock in the red, down a marginal 0.01 percent. Health care stocks underperformed, with pharma stocks including Johnson & Johnson (down 0.4 percent) hurt by worries over opioid exposure. Consumer staples lagged, with Altria off 3.5 percent on news of a Federal Trade Commission inquiry into the firm’s marketing of e-cigarettes to children.

In economic news, US consumer spending was stronger than previously estimated in the second quarter, rising at an annual 4.7 percent inflation-adjusted pace. This pace is a reminder that the strong labor market is underpinning the consumer and helping to offset weakness in global growth and the resulting weakness in domestic manufacturing. Overall GDP was shaved by 1 tenth in the second estimate for the second quarter, though still managed a respectable 2.0 percent showing. Meanwhile,  net exports opened the third quarter favorably as a $72.3 billion goods deficit in July was less than expected and nearly $2 billion lower than June. Exports rose 0.7 percent in the month to $137.3 billion with imports down 0.4 percent to $209.7 billion.

These data reflect observations at 4:00 PM US ET:  Dated Brent spot crude oil rose 52 cents to US$61.02, while gold fell US$13.10 to US$1,535.30. The US dollar gained against most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.97 percent, while the 10-year note yield rose 2 basis points to 1.50 percent.

European markets

Major European equities markets advanced Thursday on headlines suggesting US-China trade talks would resume. The Europe-wide STOXX 600 rose 1.04 percent, the German DAX gained 1.2 percent, and the French CAC was up 1.5 percent. The UK FTSE-100 gained 1.0 percent. The FTSE MIB Italian index rose 1.9 percent on news Prime Minister Giuseppe Conte has been given a mandate to form a new government.

Outperforming sectors in the Stoxx 600 included construction and materials, industrial goods and services, basic resources, and chemicals. Underperformers included real estate, travel and leisure, health care, and utilities. Among companies in the news, French drinks company Pernod Ricard rose 2.6 percent on favorable earnings and share buybacks. On the downside, UK software giant Micro Focus plunged 30 percent after slashing its guidance due to a deteriorating macroeconomic environment.

In economic news, German consumer prices provisionally fell 0.2 percent in August. This was steeper than market expectations and reduced the annual inflation rate to 1.4 percent from July's final 1.7 percent. At the same time, the flash HICP was off 0.1 percent, nudging down its yearly change from 1.1 percent to 1.0 percent.  In other news, Eurozone economic sentiment in August improved for only the second time in the last 14 months, according to the European Commission.  The headline index was up 0.4 points from July, but still short of June’s 103.3 and 7.9 points below its level a year ago. Meanwhile, French household spending on manufactured goods rose a solid 0.6 percent in July, its best performance since January. Annual growth weighed in at 0.3 percent, up from minus 0.9 percent last time and the first positive print in half a year.

Asia Pacific markets

Price action was again limited in most major Asian markets Thursday, with the regional data calendar light and no major news on the global policy outlook or trade disputes to affect sentiment during Asian hours. Chinese authorities kept the reference rate for the yuan little changed Thursday, while the Shanghai Composite index fell 0.1 percent.

Japanese shares were also steady, with the Nikkei index down 0.1 percent and the Topix index flat on the day. Hong Kong’s Hang Seng index and Australia’s All Ordinaries index advanced 0.3 percent and 0.1 percent respectively. Korea’s Kospi index was among the weaker performers in the region, down 0.4 percent, with the Samsung group of companies posting heavy losses after Korea’s Supreme Court ruled that a bribery case against senior executive Jay Y. Lee would need to be reviewed.

Australia's survey of private capital expenditures shows spending in this category fell 0.5 percent on the quarter for the three months to June after falling 1.7 percent in the three months to March. The decline in headline capex was driven by a fall in buildings and structures that offset a rise for equipment, plant and machinery. On a sectoral basis, capex rose 1.7 percent on the quarter in the mining sector, advanced 8.5 percent in the manufacturing sector, and fell 2.4 percent in other selected industries.

Looking forward

On Friday in Asia/Pacific, Japanese industrial production, Japanese retail sales, and Japanese unemployment rate, plus Indian GDP data reports are scheduled. In Europe, the following data releases are due: Eurozone HICP flash, Eurozone unemployment rate, French CPI and PPI, German retail sales, Italian CPI and GDP, and Swiss KOF leading indicator. In North America, Canadian GDP, Canadian producer prices, Canadian monthly GDP reports are due. In addition, US Chicago PMI, US consumer sentiment, and US personal income & spending reports are scheduled.

Global stock markets

 

Index

29 Aug 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

26362.25

326.15

1.2

 

NASDAQ

7973.4

116.52

1.5

 

S&P 500

2924.58

36.64

1.3

Canada

S&P/TSX Comp

16384.49

112.84

0.7

Europe

 

 

 

 

UK

FTSE 100

7184.32

69.61

1.0

France

CAC

5449.97

81.17

1.5

Germany

XETRA DAX

11838.88

137.86

1.2

Italy

MIB

21398.17

407.46

1.9

Spain

Ibex 35

8794.3

47.20

0.5

Sweden

OMX Stockholm 30

1558.74

29.61

1.9

Switzerland

SMI

9838.48

80.29

0.8

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6605.66

4.89

0.1

Japan

Nikkei 225

20460.93

-18.49

-0.1

 

Topix

1490.17

-0.18

0.0

Hong Kong

Hang Seng

25703.5

88.02

0.3

S. Korea

Kospi

1933.41

-7.68

-0.4

Singapore

STI

3081.83

25.36

0.8

China

Shanghai Comp

2890.92

-2.84

-0.1

Taiwan

TAIEX

10462.43

28.14

0.3

India

Sensex 30

37068.93

-382.91

-1.0

*Markets closed

 

 

 

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.