US and European indices tumbled while Asia managed to edge upward

US and European indices tumbled while Asia managed to edge upward

US stocks tumbled closing at their lowest level since October 2017. Investors were looking ahead to Wednesday’s Federal Reserve announcement amid mounting signs of slowing economic growth around the world.

US markets

US stocks tumbled closing at their lowest level since October 2017. Investors were looking ahead to Wednesday’s Federal Reserve announcement amid mounting signs of slowing economic growth around the world. The indices gyrated during the day. The Dow Jones industrials and S&P both retreated 2.1 percent while the Nasdaq was 2.3 percent lower. The sharply lower close came amid lingering concerns about global economic growth as well as continued uncertainty about trade between the US and China. Traders were also on edge prior to the Federal Reserve's Wednesday monetary policy announcement.

Negative sentiment was also generated by some disappointing US economic data, including a report from the National Association of Home Builders unexpectedly showing a continued deterioration in confidence in December. The report said the NAHB/Wells Fargo Housing Market Index dropped to 56 in December after tumbling to 60 in November. The December Empire State manufacturing survey also declined, to 10.9 from 23.3 in November.

PG&E declined on news the California Public Utilities Commission is considering penalties against the company for systemic violations of rules to prevent damage to natural gas pipelines during excavation activities. Best Buy and dropped. Best Buy was downgraded by a broker. Johnson & Johnson, which lost $39.8 billion in market value Friday after Reuters reported last week that the company knew for years that its baby powder sometimes contained asbestos, continued to slide. J&J denied the claim. Goldman Sachs Group dropped after Malaysian authorities filed criminal charges against banking units and a former partner of the firm in connection with the 1MDB financial scandal, the country’s attorney general said.

These data reflect observations at 4:00 PM US ET. Gold was up US$8.60 to US$1,250.00. Copper futures were down 0.71 percent to US$2.74. WTI spot crude was down US$1.98 to US$49.22. Dated Brent spot crude was down US$1.47 to US$58.80. The US dollar was down against the yen, euro, pound and Swiss franc. The Canadian dollar retreated while the Australian dollar was virtually unchanged. The yield on the US Treasury 30 year bond was down 3 basis points to 3.11 percent. The 10 year note was also down 3 basis points to 2.86 percent.

European markets

European markets retreated Monday — retailers were under heavy pressure after a profit warning from British online retailer ASOS. Lingering concerns about global economic growth as well as continued uncertainty about trade between the US and China also weighed on sentiment. The US dollar weakened against the euro before the Federal Reserve's monetary policy announcement on Wednesday. The FTSE and CAC were down 1.1 percent while the DAX declined 0.9 percent and the SMI was 1.3 percent lower.

Brexit developments also remained in focus after UK Prime Minister Theresa May attacked one of her predecessors, accusing Tony Blair of "undermining" the Brexit talks by calling for another referendum. May reportedly called his comments an "insult to the office he once held" and said Members of Parliament could not "abdicate responsibility" to deliver Brexit by holding a new poll.

Deutsche Bank fell on reports that Qatar is considering increasing its stake in the German lender. ASOS plummeted after the retailer warned of lower profits this financial year. Next and Marks & Spencer retreated. German online fashion retailer Zalando tumbled. Acacia Mining sank after the company said it has been in contact with the SFO about the allegations of corrupt activities in Tanzania, which are the subject of proceedings in Tanzania. Shares of housebuilders Persimmon, Barratt Developments, Taylor Wimpey and Berkeley dropped.

BHP Billiton was down after it announced a special dividend after selling its US shale assets. ABB declined after it agreed to sell 80.1 percent of its Power Grids division to Japan's Hitachi. Hennes & Mauritz tumbled in Stockholm after its fourth quarter sales including VAT increased to 65.45 billion Swedish kronor from 58.48 billion kronor in the prior year. Novartis, Nestle and Roche were lower along with Swatch and Richemont.

November harmonized index of consumer prices rose 1.9 percent on the year. The figure is the lowest since May, when it was at the same level. The December Empire State manufacturing index tumbled to 10.9 from November’s reading of 23.3.

The December housing market index declined to 56 from 60 in November indicating continued deterioration in confidence in December.

Asia Pacific Markets

Unlike European stocks, Asian shares ended broadly higher Monday. Investors looked bargains after two weeks of losses driven by trade worries and the softening global economic growth outlook. The looming Federal Reserve's monetary policy meeting provided investors with a note of caution with many expecting an increase in the benchmark interest rate by 25 basis points to between 2.25 percent and 2.5 percent. The Bank of Japan and the Bank of England will also hold monetary policy meetings this week.

The Shanghai Composite was up 0.2 percent and the Hang Seng inched down 6.81 points. Investors were closely watching the annual Central Economic Work Conference later this week. This week’s annual Central Economic Work Conference, a closed-door gathering of top party leaders and policymakers, is being watched by investors for any fresh policy steps to ward off a sharper slowdown in the world’s second-largest economy. The economic conference is likely to convene on Wednesday, two policy insiders said, a day after an event marking the 40th anniversary of China’s reform and opening up, where President Xi Jinping is due to make what the official Xinhua news agency described as an “important” speech.

The Nikkei was up 0.6 percent and the Topix was up 0.1 percent. Electronic makers and technology stocks led the advance with Advantest, TDK and Tokyo Electron climbing. Utility Tokyo Electric Power and Chubu Electric Power were also higher. However, discount children's wear retailer Nishimatsuya Chain slumped after slashing its annual profit forecast.

The S&P/ASX and All Ordinaries were both up 1.0 percent after a mid-year update showed that the budget would soon return to surplus for the first time in a decade, leaving room for tax cuts ahead of elections. BHP rallied as it announced a special dividend after selling its U.S. shale assets. Rio Tinto advanced after it completed the $500 million sale of its French aluminum smelter, freeing up cash the company said it would return to shareholders. Mineral Resources soared after it announced an A$1.6 billion partnership with global lithium producer Albemarle Corporation. Banks ANZ, NAB and Westpac dropped on concerns over the global growth outlook.

The Kospi added 0.1 percent prior to key central bank meetings, including the two-day FOMC meeting. The Sensex was 0.9 percent higher.

Looking forward

Minutes are published from the Reserve Bank of Australia policy meeting earlier this month. Germany releases December Ifo survey. In the US, November housing starts will be released. The FOMC two day meeting begins.

Global Stock Markets

    End 2018 Daily Percent Change
  Index 2017 Dec 14 Dec 17 Change Daily 2018 Yr/Yr
North America                
United States Dow 24719.22 24100.51 23592.98 -507.53 -2.1 -4.6 -4.8
  NASDAQ 6903.39 6910.67 6753.73 -156.94 -2.3 -2.2 -3.5
  S&P 500 2673.61 2599.95 2545.94 -54.01 -2.1 -4.8 -5.4
Canada S&P/TSX Comp 16209.13 14595.07 14362.65 -232.42 -1.6 -11.4 -11.0
UK FTSE 100 7687.77 6845.17 6773.24 -71.93 -1.1 -11.9 -10.1
France CAC 5312.56 4853.70 4799.87 -53.83 -1.1 -9.7 -11.5
Germany XETRA DAX 12917.64 10865.77 10772.20 -93.57 -0.9 -16.6 -19.1
Italy MIB 21853.34 18910.79 18693.45 -217.34 -1.1 -14.5 -16.5
Spain Ibex 35 10043.90 8886.10 8812.50 -73.60 -0.8 -12.3 -14.0
Sweden OMX Stockholm 30 1576.94 1471.67 1451.95 -19.72 -1.3 -7.9 -10.1
Switzerland SMI 9381.87 8713.68 8602.61 -111.07 -1.3 -8.3 -9.0
Australia All Ordinaries 6167.29 5678.82 5732.86 54.04 1.0 -7.0 -6.5
Japan Nikkei 225 22764.94 21374.83 21506.88 132.05 0.6 -5.5 -6.1
  Topix 1817.56 1592.16 1594.20 2.04 0.1 -12.3 -12.3
Hong Kong Hang Seng 29919.15 26094.79 26087.98 -6.81 0.0 -12.8 -10.2
S. Korea Kospi 2467.49 2069.38 2071.09 1.71 0.1 -16.1 -16.6
Singapore STI 3402.92 3077.09 3114.25 37.16 1.2 -8.5 -8.8
China Shanghai Comp 3307.17 2593.74 2597.97 4.23 0.2 -21.4 -20.5
Taiwan TAIEX 10642.86 9774.16 9787.53 13.37 0.1 -8.0 -6.8
India Sensex 30 34056.83 35962.93 36270.07 307.14 0.9 6.5 7.9

Data Source — Haver Analytics

Bond markets

10-Yr Govt BondsClosing YieldChange Yield (bp)
US 2.86% -3
UK 1.26% 2
Germany 0.25% 0
Japan 0.02% 0
Australia 2.44% -2

Source — Bloomberg

Currencies and commodities

CurrencyDec 14Dec 17Change (%)
Japanese yen 113.3600 112.7400 0.5%
Australian dollar 0.7178 0.7175 0.0%
Yuan 6.9076 6.8973 0.1%
Euro 1.1305 1.1346 0.4%
British pound 1.2587 1.2617 0.2%
Swiss franc 0.9979 0.9925 0.5%
Canadian dollar 0.7478 0.7453 -0.3%

Source — Bloomberg 

CommoditiesDec 17Change
Brent Spot $58.90 -2.29%
Gold $1,250.00 $8.60
Thompson-Reuters/ Jeffreys Commodity index 184.19 -1.31%

Source — Bloomberg 

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