US stocks steady as focus remains on trade and shutdown negotiations

  • 12 Feb 2019

    US stocks steady as focus remains on trade and shutdown negotiations

    US stocks were little changed Monday with a bare data calendar keeping investors’ attention focussed on negotiations aimed at preventing another government shutdown and averting a planned increase in tariffs. The Dow closed 0.2 percent lower, while the S&P and the Nasdaq both advanced 0.1 percent.

    US markets

    US stocks were little changed Monday with a bare data calendar keeping investors’ attention focussed on negotiations aimed at preventing another government shutdown and averting a planned increase in tariffs. The Dow closed 0.2 percent lower, while the S&P and the Nasdaq both advanced 0.1 percent.

    Negotiations to avert another government shutdown continue. Senior Democrat and Republican lawmakers were due to meet late Monday ahead of a planned rally by President Trump aimed at increasing pressure on Congress to support his border security demands. Congress has until the end of the week to reach a deal before the extension of government funding agreed to last month expires.

    Making her first public comments since she was appointed in November, Federal Reserve Governor Michelle Bowman expressed her support for the FOMC’s current monetary policy stance. Governor Bowman voted with other members to raise rates in December and to leave them on hold in January. Governor Bowman also voiced confidence in the economic outlook, arguing that recent employment and inflation data indicate that the economy is “in a good place”.

    These data reflect observations at 4:00 PM US ET. Gold lost US$6.70 to US$1,311.80 and dated Brent spot crude was down US$0.61 to US$61.49. The US dollar made solid gains against other major currencies, performing particularly well against the yuan, the yen, and the pound. The yield on the US Treasury 30 year bond rose 2 basis points to 3.00 percent while the 10 year note rose 2 basis points to 2.66 percent.

    European markets

    Major European markets posted solid gains Monday, with the FTSE up 0.8 percent, the CAC closing 1.1 percent higher, and the DAX advancing 1.0 percent. Italy’s MIB was the strongest major index in the region, up 1.2 percent, with domestic banks receiving a boost on news that their capital positions are above levels required by the European Central Bank.

    UK data showed a slowdown in economic growth in the three months to December, with Brexit uncertainty clearly having a major impact on activity. GDP increased 0.2 percent on the quarter, down from an increase of 0.6 percent in the three months to September, while year-on-year growth fell from 1.6 percent to 1.3 percent, its lowest level since mid-2012. Household spending and government spending made solid contributions to headline growth, but business investment fell 1.4 percent on the quarter, its fourth consecutive quarterly decline. Net exports also made a small negative contribution to growth. In annual terms, the UK economy grew 1.4 percent in 2018, down from 1.8 percent in 2017 and the weakest growth since 2012.

    Monthly UK data were broadly in line with the GDP report. Industrial production fell 0.5 percent on the month in December, its fifth consecutive monthly decline, and dropped 0.9 percent on the year. Trade data showed a modest narrowing of the deficit from £12.4 billion in November to £12.1 billion in December, with both exports and imports falling 2.3 percent on the month.

    UK Chancellor of the Exchequer Philip Hammond pointed to the ongoing contraction in business investment as another reason to resolve uncertainty about Brexit as soon as possible, though he also noted that slower global growth was a factor contributing to domestic weakness. The UK and Switzerland completed a trade deal Monday as part of efforts to minimise disruptions to bilateral trade ahead of the Brexit deadline.

    Asia Pacific Markets

    Trading resumed Monday in China and elsewhere in the region after last week’s lunar new year holidays, but markets were closed in Japan. The Shanghai composite index gained 1.4 percent on its pre-holiday closing level, while Taiwan’s benchmark index advanced 0.7 percent. Markets also closed higher in Hong Kong, Singapore and Korea but fell in India.

    Australia’s All Ordinaries index closed down 0.1 percent, with major banks underperforming. Mining companies, including Rio Tinto and BHP, posted solid gains in response to a surge in iron ore prices. This surge followed the resumption of trading in iron ore futures in China after last week’s holidays, with traders there pricing in the impact of supply disruptions caused by last month’s major mining disaster in Brazil.

    Bloomberg reported that two large Chinese borrowers missed payment deadlines this month, naming China Minsheng Investment Group and Wintime Energy. Although Chinese officials have taken steps to ease liquidity in recent months, access to credit remains difficult for riskier borrowers. Wintime Energy defaulted last year but was reported to have missed a payment due under a restructured debt repayment plan while Minsheng was reported to have missed a payment due on a maturing bond.

    US-China trade talks began Monday in Beijing but officials have yet to provide details of any progress. The US is scheduled to increase tariffs on Chinese imports from 10 percent to 25 percent at the start of March if agreement is not reached on issues such as market access and intellectual property protection, but some reports suggest this deadline may be extended.

    Looking forward

    Australian home loans data are scheduled for release shortly, followed by Indian inflation and industrial production data. The European data calendar is bare, with Federal Reserve Chairman Jerome Powell speaking publicly during the New York session.

    Global Stock Markets
      End 2019DailyPercent Change
     Index2018Feb 8Feb 11ChangeDaily2019Yr/Yr
    North America                
    United States Dow 23327.46 25106.33 25053.11 -53.22 -0.2 7.6 1.8
      NASDAQ 6635.28 7298.20 7307.90 9.70 0.1 10.0 4.7
      S&P 500 2506.85 2707.88 2709.80 1.92 0.1 8.0 2.0
    Canada S&P/TSX Comp 14322.86 15633.33 15568.85 -64.48 -0.4 9.1 2.2
                     
    Europe                
    UK FTSE 100 6728.13 7071.18 7129.11 57.93 0.8 6.0 -0.7
    France CAC 4730.69 4961.64 5014.47 52.83 1.1 6.0 -2.4
    Germany XETRA DAX 10558.96 10906.78 11014.59 107.81 1.0 4.3 -10.3
    Italy MIB 18324.03 19351.90 19586.56 234.66 1.2 6.9 -12.3
    Spain Ibex 35 8539.90 8856.80 8936.40 79.60 0.9 4.6 -8.5
    Sweden OMX Stockholm 30 1408.74 1527.17 1542.33 15.16 1.0 9.5 1.4
    Switzerland SMI 8429.30 9003.41 9068.62 65.21 0.7 7.6 2.8
                     
    Asia/Pacific                
    Australia All Ordinaries 5709.44 6136.15 6128.57 -7.58 -0.1 7.3 3.5
    Japan Nikkei 225 20014.77 20333.17 * * * * *
      Topix 1494.09 1539.40 * * * * *
    Hong Kong Hang Seng 25845.70 27946.32 28143.84 197.52 0.7 8.9 -4.5
    S. Korea Kospi 2041.04 2177.05 2180.73 3.68 0.2 6.8 -8.6
    Singapore STI 3068.76 3202.04 3206.27 4.23 0.1 4.5 -5.3
    China Shanghai Comp 2493.90 * 2653.90 * * 6.4 -15.9
    Taiwan TAIEX 9727.41 * 10004.25 * * 2.8 -4.0
    India Sensex 30 36068.33 36546.48 36395.03 -151.45 -0.4 0.9 6.1

    Data Source — Haver Analytics

    Bond markets
    10-Yr Govt BondsClosing YieldChange Yield (bp)
    US 2.66% 2
    UK 1.18% 3
    Germany 0.12% 3
    Japan -0.04% 0
    Australia 2.06% -4

    Source — Bloomberg

    Currencies and commodities
    CurrencyFeb 8Feb 11Change (%)
    Japanese yen 109.7300 110.3800 -0.6%
    Australian dollar 0.7088 0.7063 -0.4%
    Yuan 6.7451 6.7923 -0.7%
    Euro 1.1323 1.1277 -0.4%
    British pound 1.2945 1.2861 -0.6%
    Swiss franc 1.0005 1.0043 -0.4%
    Canadian dollar 0.7531 0.7518 -0.2%

    Source — Bloomberg 

    CommoditiesFeb 11Change
    Brent Spot $61.49 -0.98%
    Gold $1,311.80 ($6.70)
    Thompson-Reuters/ Jeffreys Commodity index 184.05 -0.50%

    Source — Bloomberg