Global shares: US flat to firm after US-China trade deal; Europe soft; Asia mixed

United States

US equities ended slightly higher Wednesday but retreated from initial highs as reaction was generally muted to the US-China trade deal. The Dow industrials rose 0.3 percent, the S&P 500 gained 0.2 percent, and the NASDAQ was up 0.1 percent.

Markets appeared relieved as terms of the US-China pact, including Chinese purchases of US farm goods, matched expectations for a modest deal and removed the immediate threat of a trade war. Attention focused instead on a mixed batch of corporate earnings, with retailers off on soft holiday results.

Among sectors in the S&P 500, defensive sectors led the gains, with utilities, health care, and materials leading, while energy, financials, and consumer discretionary lagged. Soft oil prices depressed energy stocks, with exploration and production leader Haliburton off 1.6 percent.

Among companies in the news, Target, the retailer, fell 6.6 percent after reporting disappointing sales during the holiday period. Toymakers Mattel and Hasbro fell 4.6 percent, and 2.1 percent, respectively, on poor holiday results. Bank of America declined 1.1 percent after warning of weak net interest income ahead. On the positive side, United Health Group rose 2.8 percent after an earnings beat, and reaffirmed 2020 guidance.

In US economic news, energy lifted producer prices into the plus column in December -- but by only 0.1 percent. Excluding energy as well as food, producer prices also rose 0.1 percent, as they did when excluding energy, food and also trade services. Year-on-year readings in December's report were modest if not subdued, underscored by a 1.3 percent rise overall. Separately, the Empire State manufacturing index rose 1.3 points in January to a moderate 4.8, coming in at the high end of Econoday's consensus range.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 14 cents to US$64.30, while gold rose US$9.80 to US$1,556.60. The US dollar was mostly weaker against major currencies. The US Treasury 30-year bond yield fell 3 basis points to 2.24 percent while the 10-year note yield fell 3 basis points to 1.78 percent.


European equities ended mostly flat to lower Wednesday on soft economic data as markets awaited details of the US-China trade pact. The Europe-wide STOXX 600 firmed 0.01 percent, the German DAX eased 0.2 percent, the French CAC was off 0.1 percent, and the UK FTSE-100 rose 0.3 percent.

Among sectors, defensive shares outperformed, including utilities, health care, and consumer staples, while autos, banks, insurance, and basic resources lagged. UK markets rose as sterling fell on weak economic data, and comments from Bank of England officials suggesting a rate cut is possible soon. German stocks got the worst of it, with automaker Daimler off 2.5 percent and Deutschebank off 2.4 percent.

In economic news, Eurozone goods production expanded in November, but not by much and following a sharp downward revision to October; the underlying trend remains worryingly soft. Output (ex-construction) rose a slightly smaller than expected 0.2 percent on the month, only denting the previous period's 0.9 percent decline. This put annual growth at minus 1.5 percent, up from minus 2.6 percent but mainly due to a particularly weak period in November 2018. Separately, UK inflation was significantly weaker than expected at year-end. The December CPI was only flat at November's level, reducing its annual rate from 1.5 percent to just 1.3 percent, its lowest reading since November 2016 and some 0.7 percentage points short of its medium-term target.

Asia Pacific

Major Asian markets posted mixed but generally modest moves Wednesday, with the regional data calendar bare and investors focused on the details of the US-China trade deal due to be signed in Washington later in the day and potential indications of next steps for trade negotiations. Japan's Nikkei and Topix indices as well as the Shanghai Composite index all fell 0.5 percent on the day, while Hong Kong's Hang Seng index closed down 0.4 percent. Australia's All Ordinaries index outperformed with a gain of 0.5 percent.

Looking ahead*

On Thursday in Asia/Pacific, Japanese machine orders and PPI, and Chinese home price index reports will be released. In Europe, the following are scheduled: German CPI and Eurozone ECB minutes. In North America, US releases are scheduled for the following: jobless claims, Philadelphia Fed, retail sales, import and export prices, business inventories, housing market index, and Treasury TICS.

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