Daily market review

United States

US equities ended flat Wednesday with technology shares better on positive news from International Business Machines, and an improved outlook for chipmakers. The Dow industrials eased 0.03 percent, the S&P 500 rose 0.03 percent, and the NASDAQ rose 0.1 percent. Markets retreated from early highs on concern over President Trump's renewed threat to impose tariffs on European auto imports.

Technology shares outperformed after positive quarterly results from IBM, which rose 3.4 percent on signs the company is recovering after long stagnation. An upbeat business forecast from ASML, the Dutch semiconductor equipment maker, lifted the microchip sector. Communications services and financials outperformed, while energy, real estate, materials, and industrials lagged.

Among other companies in the news, Netflix fell 3.6 percent after reporting domestic subscriber growth below expectations, and guidance for Q1 revenue and subscriptions below expectations. Apple rose 0.4 percent after news that it was introducing a lower-cost iPhone, and that it was raising its orders of semiconductors to meet strong demand.

Dow member Johnson & Johnson declined 0.7 percent as its 2020 earnings guidance missed expectations. United Airlines gave up early gains to end down 2.9 percent as the market focused on rising fuel costs despite better revenues per passenger. Declining oil prices hurt ConocoPhilips, which fell 1.6 percent.

In US economic news, acceleration is finally appearing for existing home sales, jumping 3.6 percent in December to a 5.540 million annual rate that exceeded Econoday's consensus range. This was the strongest showing in nearly two years. Condo resales, which had been lagging, were unusually strong, up a monthly 10.7 percent in December to a 620,000 rate though single-family homes were also very strong, up 2.7 percent to 4.920 million.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.31 to US$63.16, while gold rose by 30 cents to US$1,558.00. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield declined 2 basis points to 2.22 percent while the 10-year note yield was flat at 1.77 percent.


European equities gave up initial gains to end weaker Wednesday after President Trump renewed his threat to impose tariffs on European cars. The Europe-wide STOXX 600 eased 0.1 percent, the German DAX slipped 0.3 percent, the French CAC fell 0.6 percent, and UK FTSE-100 declined 0.5 percent.

Stocks were higher in the morning on relief that the Chinese authorities appeared to be acting to contain the outbreak of a respiratory virus centered in Wuhan. But Trump's comment that he was serious about imposing auto tariffs if trade talks fail instantly reversed the risk-on sentiment, and automakers and their suppliers were hit. Caution before the ECB policy meeting Thursday limited market movement Wednesday, though expectations call for no ECB policy shift.

Among shares in the Stoxx 600, in addition to autos, underperformers included oil & gas, health care, and construction & materials, while financial services, utilities, and media outperformed. On the downside, Daimler, the German automaker, declined 2.1 percent on the tariff worry, while Nokian Tyres, the Finnish tire maker, fell 2.2 percent. ASML, the Dutch semiconductor equipment maker, predicted double-digit sales and profits growth in 2020 despite the US-China trade war.

In economic news, French manufacturing sentiment rose a bit in January but only after December's reading had been revised sharply weaker. Consequently, while at 100, the headline climate indicator was up 2 points but still on the soft side of market expectations.

Asia Pacific

Major Asian markets advanced Wednesday, in some cases partly and in other cases more than fully reversing losses posted Tuesday. A very light regional data calendar provided little guidance to investors and sentiment appeared to be relatively resilient to developments relating to the coronavirus outbreak originating in China.

After sharp losses earlier in the week, Hong Kong's Hang Seng index rebounded with an increase of 1.3 percent, while the Shanghai Composite index closed up 0.3 percent. Japan's Nikkei and Topix indices advanced 0.7 percent and 0.5 percent respectively. Australia's All Ordinaries index closed up 1.0 percent, with major domestic retailers gaining on news that German retailer Kaufman had abandoned plans to establish a network of stores in Australia.

Looking ahead*

On Thursday in Asia/Pacific, Japanese merchandise trade, Australian labor force survey, and Singapore CPI figures are scheduled. In Europe, the ECB will announce its policy decision and the EC consumer confidence flash report is due. In North America, the following are on tap: US jobless claims, leading indicators, EIA petroleum status, and Kansas City Fed manufacturing index.

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