Global shares: US, Europe, Asia up as Mideast worries fade

United States

Risk assets advanced Thursday on optimism about a US-China trade pact and as strength in technology and financial shares lifted the market. The Dow industrials rose 0.7 percent, the S&P 500 rose 0.7 percent, and the NASDAQ was up 0.8 percent.

Financial stocks rose on positive analyst comments about Goldman Sachs (up 2.1 percent) and Citigroup (up 0.9 percent), while Apple (up 0.9 percent) and its suppliers were lifted by an analyst upgrade, and a positive report on iPhone sales to China in December.

Equities sentiment has been bolstered by confirmation that the US and China will sign an interim trade pact on Jan. 15, and as worries eased about prospects for an all-out clash between Iran and the US.

Among companies in the news, Kohl's dropped 6.5 percent after the retailer reported poor holiday sales and lowered guidance. Bed Bath & Beyond likewise plunged 19.3 percent on weak third quarter sales and after withdrawing its fourth-quarter guidance. On the positive side, Costco rose 1.6 percent after reporting strong holiday results.

In US economic news, jobless claims had been at a 2-year high but moved visibly lower in the January 4 week, down 9,000 to a 214,000 level that is just within the low side of Econoday's consensus range. The 4-week average, down 9,500 to 224,000, is now back at its level in early December.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 33 cents to US$65.47, while gold declined US$3.50 to US$1,551.50. The US dollar rose against most currencies. The US Treasury 30-year bond yield fell 4 basis points to 2.33 percent while the 10-year note yield fell 2 basis point to 1.85 percent.


European equities rose Thursday on bullishness linked to easing Mideast worries, better sentiment on US-China trade, and upbeat German economic data. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX jumped 1.3 percent, the French CAC rose 0.2 percent, and the UK FTSE-100 rose 0.3 percent.

German shares outperformed on a positive surprise for German industrial production that eased worries about recession in Germany.

Among sectors in the STOXX 600, technology, telecom, and health care led the gainers, while basic resources, retail, and oil & gas lagged. UK retail stocks were in focus with Marks & Spencer off 11 percent on a poor third-quarter sales update, while retailer Tesco rose 1 percent on positive third-quarter results. Technology shares were lifted by a positive report from Apple on its iPhone shipments to China in December, while semiconductors gained on an analyst upgrade for Aixtron, a German chip equipment maker which rose 15 percent.

In economic news, German industrial production posted a solid and larger than expected rebound in November. Following a smaller revised 1.0 percent monthly fall in October, output climbed 1.1 percent, its first increase since August and only its second rise in the last six months. As a result, annual growth moved up from minus 4.7 percent to minus 2.7 percent.

Asia Pacific

Major Asia markets rebounded sharply Thursday, largely reversing declines made earlier in the week, with Middle East developments again the dominant focus during the trading session. Japan's Nikkei and Topix indices advanced 2.3 percent and 1.6 percent respectively, while Hong Kong's Hang Seng index gained 1.7 percent. The Shanghai Composite index and Australia's All Ordinaries index both closed up 0.9 percent on the day.

China's headline consumer price index increased 4.5 percent on the year in December, unchanged from the pace set in November and matching the strongest inflation since January 2012. In annual terms, headline CPI inflation was 2.9 percent in 2019, up from 2.1 percent in 2018 and just below officials' target of 3.0 percent for the year. Ongoing disruptions in pork supply remain the driving factor keeping headline inflation high in December, with food price inflation still at elevated levels but underlying price pressures relatively steady and subdued. Although upcoming lunar new year holidays may keep upward pressure on food prices in the near-term, officials will likely discount the significance of this factor and maintain an inflation target of around 3.0 percent in 2020. China's headline producer price index fell 0.5 percent on the year in December after dropping 1.4 percent in November.

Australia's trade surplus widened from a revised A$4.075 billion in October to A$5.8 billion in November, well above the consensus forecast for a surplus of A$4.15 billion. Exports rose 1.8 percent on the month after falling 4.6 percent previously, largely reflecting a strong rebound in exports of non-rural goods and services, offset by weaker growth in rural exports. Imports fell 2.8 percent on the month after rising 0.3 percent previously, with weaker growth in imports of consumption goods, capital goods, and intermediate and other merchandise goods partly offset by a smaller decline in imports of services.

Looking ahead*

On Friday in Asia/Pacific, Japanese household spending, Australian retail sales, and Indian industrial production figures are due. In Europe, French industrial production and Italian industrial production releases are scheduled. In North America, Canadian labor force and US employment situation reports will be released.

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