Morning Update Note
Friday 22nd February 2019
- Stocks finished lower Thursday, with the Nasdaq snapping an eight session winning streak, as fresh economic data out of Europe and Japan suggest further slowing in global growth. However, fears about a world-wide slowdown were somewhat tempered by reports that US and Chinese negotiators were beginning to outline a deal to end a long-running trade spat.
- The Dow Jones Industrial Average fell 0.4%, to 25,850.63 and the S&P 500 shed 0.4%, to 2,774.88. The Nasdaq Composite Index dropped 0.4%, to 7,459.71.
- US and Chinese negotiators have started to iron out specific details of a possible trade deal, Reuters reported, citing sources it called familiar with the talks. The report said agreements in principle are being drawn up in six key areas: forced technology transfers and cyber theft, intellectual-property rights, services, currency, agriculture and nontariff barriers to trade.
- US economic data were mixed, with durable-goods orders rising 1.2% in December, below the 1.4% expected by economists, according to a MarketWatch poll. Outside of orders for airplanes and automobiles, orders rose just 0.1%. Meanwhile, a key measure of business investment, known as core orders, slipped 0.7% in December.
- Manufacturing activity declined in Pennsylvania, Delaware and New Jersey in February, for the first time since May of 2016, according to the Philly Fed manufacturing index. The index fell to a seasonally adjusted reading of -4.1 from 17 in January.
- US private sector output growth rose in February at a faster rate than January, according to the Markit PMI composite survey of both the manufacturing and services sectors. The index rose to a seasonally adjusted level of 55.8 in February from 54.4 in January.
- Tesla slid 3.7%, after Consumer Reports withdrew its recommendation of the Model 3 due to “declining reliability.”
- Nike fell 1.1%. The sports apparel and equipment company was in the spotlight after Duke University basketball sensation Zion Williamson was lost to a knee injury seconds into a game against archrival North Carolina, when his foot slid on the floor and his Nike shoe came apart.
- Domino’s Pizza skidded 9.2%, after the global chain reported fourth-quarter earnings, revenue and same-store sales that fell short of Wall Street expectations.
- Albermarle climbed 7.8%, after the lithium producer released better than expected quarterly earnings.
- Europe’s markets were mixed on Thursday, struggling against a myriad of headwinds including weak economic data and earnings. A batch of earnings data also drove action for a number of stocks, and leaned on some indexes.
- The Stoxx Europe 600 lost 0.28% to 370.41 on Thursday.
- The UK’s FTSE 100 led the region’s top decliners, as the index fell 0.85% to 7,167.39, pulled down by poorly received results from UK heavyweights Centrica and BAE Systems.
- Italy’s FTSE MIB dropped by 0.47% to 20,209.72, while France’s CAC 40 closed flat at 5,196.11.
- Spain’s IBEX 35 gained 0.11% to 9,191.20 and the German DAX declined by 0.57%.
- Business surveys released Thursday showed the Eurozone’s manufacturing sector entered its first downturn since mid-2013, led by Germany.
- In Brexit news, British Prime Minister Theresa May held “constructive” talks with European Commission president Jean-Claude Juncker, prompting speculation of some long-awaited progress in talks ahead of the March 29 split.
- Centrica slumped by 12%, after the FTSE 100 energy company warned it will struggle to reach cash flow targets in 2019 owing to exceptional charges. Although the company met its target for 2018, chief executive Iain Conn warned 2019 would be a challenge.
- P. Moeller-Maersk fell by 10%, after its fourth quarter profit missed expectations, a drop chief executive Soren Skou put down to “a challenging start to 2018”. The world’s largest container shipping company acts as a global gauge for trade, at a time when the US and China trade negotiations are on-going.
- UK defense company BAE Systems dropped by 7.85%, despite reporting a 14% profit increase, after the weapons maker said that Germany’s band on selling arms to Saudi Arabia could prove “difficult” for the company in the long run, City AM reported.
- Barclays gained, after reporting its profits rose in 2018. The UK bank booked group pretax profits of £3.49 billion last year, while revenues were flat at £21.1 million. Analysts at Jefferies described the figures as “a bit dull, but possibly good enough.”
- Asian shares have turned more positive after a sluggish start, following a slide on Wall Street as investors nervously watched the US-China trade talks in Washington.
- Japan’s benchmark Nikkei 225 slipped 0.2%. Australia’s S&P/ASX 200 gained 0.46% while South Korea’s Kospi was marginally higher.
- Hong Kong’s Hang Seng gained 0.3%, while the Shanghai Composite has gained momentum in afternoon trade, pushing on 1.9%.
- Among individual stocks, Tokyo Electron slumped 1.99% and Kobe Steel dropped 1.25% in Tokyo trading. In Seoul, Hyundai Motor advanced 0.83%.
- AAC (+11.36%) and Sunny Optical (+5.78%) gained strongly in Hong Kong, while casino operator Sands China lost 0.89%.
- 10yr and 30yr US treasuries are currently trading at 2.68% and 3.04% respectively.
- 10yr UK gilts trade with a yield of 1.20%.
- German 10yr bund yields trade at 0.11%.
- 10yr Italian and Spanish bond yields trade at 2.85% and 1.2% respectively.
- The WTI crude oil price is $57.10
- Brent crude is $67.14
- The gold price is $1,326.16
- The silver price is $15.90
- The COMEX copper price is $2.91
- The Yen is trading at 110.73 against the US dollar.
- The pound is trading at 1.30 against the US dollar.
- The pound is trading at 1.15 against the Euro.
The Psigma Investment Team
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