Search This Blog

Search Tool

Mar 27, 2018

Asia, Europe and U.S. Market Report on March 27, 2018.

Trade, earnings and currencies on the agenda

Cheang Ming

Asian stocks closed higher on Tuesday after Wall Street rebounded on the first day of the trading week as China and the U.S. moved to ease trade tensions.
In Tokyo, the Nikkei 225 jumped 2.65 percent, or 551.22 points, to close at 21,317.32. The broader Topix gained 2.74 percent, as all sectors advanced. The oil and coal subindex led the climb higher, rising 4.13 percent, while construction and machinery names also recorded substantial gains.
Seoul's Kospi also rose, with the benchmark adding 0.61 percent to end at 2,452.06 even as index heavyweight Samsung Electronics slid 0.6 percent. That decline was offset by gains in automakers and financials, with Hyundai Motor rising 3.01 percent.
Chipmakers traded lower after Financial Times reported that China offered to purchase more U.S. semiconductors to alleviate its trade surplus with the U.S. while buying fewer from elsewhere. SK Hynix fell 3.1 percent by the end of the session.
Steelmakers were mixed after South Korea said on Monday that its steelmakers would face U.S. quotas on imports, but not tariffs: Posco popped 5.34 percent and Hyundai Steel jumped 3.56 percent, but Seah Steel lost 2.54 percent.


NIKKEI NIKKEI 21317.32 --- UNCH 0%
HSI HSI 30790.83
242.06 0.79%
ASX 200 S&P/ASX 200 5832.30 --- UNCH 0%
SHANGHAI Shanghai 3166.29
32.57 1.04%
KOSPI KOSPI Index 2452.06 --- UNCH 0%
CNBC 100 CNBC 100 ASIA IDX 8712.79
75.76 0.88%
Greater China markets also bounced. Hong Kong's Hang Seng Index rose 0.79 percent, or 242.06 points, to finish at 30,790.83 after paring steeper gains seen earlier in the day. Technology and telecommunications stocks led gains for the day.
On the mainland, the Shanghai composite tacked on 1.04 percent to close at 3,166.29 and the Shenzhen composite rose 2.2 percent to finish at 1,829.69. Small caps outperformed, with the Chinext start-up board surging 3.38 percent while the blue chip CSI 300 edged higher by 0.86 percent.
Elsewhere, the ASX 200 added 0.72 percent to close at 5,832.30 as most sectors posted gains. Gold producers, however, slipped 0.62 percent.

Trade tensions ease

The gains seen in Asia came after markets sank on Friday on the back of jitters over a possible trade war. More recent news suggested there could be some positive developments on trade-related issues, with the Wall Street Journal reporting that the two countries had begun "quietly" negotiating.
White House trade advisor Peter Navarro said Monday he was "hopeful" China would work with the U.S. to address trade-related issues.
Meanwhile, Chinese Premier Li Keqiang said during a Monday conference that the two countries should "stick to negotiations" to resolve differences.
Trump first signed off on tariffs against steel and aluminum imports earlier this month. China responded to those tariffs on Friday when it proposed a list of 128 U.S. products it could target.
U.S. stocks more than reversed losses seen on Friday as trade fears eased: The Dow Jones industrial average rose 2.84 percent, or 669.40 points, to close at 24,202.60, recording its largest one-day percentage gain since August 2015.
Despite the positive bias in markets on Tuesday, there were still concerns in the longer term.
"[B]efore long, someone is going to think that it may be possible to 'game' the U.S. president's announcements and call his bluff," ING Chief Economist Robert Carnell wrote in a note, in reference to President Donald Trump's tendency of using tough talk as a negotiating tactic.
"This could be on trade issues. It could equally be on foreign policy ... This worries me," Carnell added.
Also of note, Australia on Tuesday announced it would expel two Russian diplomats in solidarity with the U.K. and other allies following a nerve agent attack that took place on British soil.
In individual stocks, Taiwan's HTC surged 6.35 percent. The move came after the phone maker announced that gains related to the conclusion of a $1.1 billion agreement with Google would be recognized in the first quarter of the year, Reuters reported.
In currencies, the dollar was subdued against a basket of rivals as investor sentiment improved. The dollar index was steady at 89.025 at 3:58 p.m. HK/SIN, after touching a five-week low in the previous session.
Against the safe-haven yen, the dollar held onto overnight gains to trade at 105.49, after slipping below the 105 handle last week.
Meanwhile, the yuan rose to its highest levels in more than two and a half years during the day.
Of note, the euro extended gains after bouncing overnight following comments from European Central Bank member Jens Weidmann that expectations for an interest rate hike toward the middle of 2019 were "not completely unrealistic," Reuters reported. The euro last traded at $1.2464.
Correction: This article has been updated to reflect the role for Peter Navarro in the White House. 


Focus on global trade, Russia, mergers

Silvia Amaro, Ryan Browne

European equities jumped higher Tuesday as concerns over a global trade war eased.


FTSE FTSE 7000.14
111.19 1.61% 712345873
DAX DAX 11970.83
183.57 1.56% 101729724
CAC CAC 5115.74
49.46 0.98% 86886627
IBEX 35 --- --- --- --- --- ---
The pan-European Stoxx 600 closed provisionally higher by 1.16 percent with every sector moving into positive territory. Technology stocks were the top performers, up around 2 percent.
Overall the main driver of market sentiment was news that the U.S. and China are open to discuss trade-related issues. The news comes after a ratcheting up of tensions between the superpowers and fears of a potential trade war. The White House is seeking reduced tariffs on imported cars as well as asking China to allow foreign-majority ownership of financial services firms in exchange for not imposing higher prices on an array of imported Chinese goods.
Investors are also keeping their eye on politics after several European countries decided to expel many Russian diplomats after an alleged nerve attack in U.K. soil on a former Russian spy. The U.S. also ordered on Monday the expulsion of 60 diplomats and Australia another two, adding that it could also boycott the soccer World Cup this summer in Russia.
GlaxoSmithKline ended the day at the top of the Euro Stoxx 600, finishing 4.8 percent higher. GlaxoSmithKline is buying Novartis out of its consumer health care partnership for $13 billion, taking over products including Sensodyne toothpaste, Panadol headache tablets, and Nicotinell patches. Analysts believe that the merger will increase shareholder payouts.
French food retailer Casino Guichard rose more than 4 percent. The firm is joining forces with Amazon to take its groceries to Amazon Prime Now customers. The service will start this year in Paris.
Heating and plumbing products firm Ferguson also moved up by 6.7 percent to top the FTSE 100 after reporting its half-year results. The firm posted an ongoing revenue of 10.3 percent ahead of last year, Reuters reported.
At the other end of the index stood H&M. The Swedish retailer announced a lower net profit in the first quarter, sending shares down by 5.04 percent for the day.
U.S. stocks continued to trade higher Tuesday, adding to the strong gains seen in the previous session, as concerns over a trade war dampened.
Finally, Deutsche Bank is reportedly looking to replace John Cryan as chief executive. The bank's share price rose 1.14 percent over the course of the day.


Nasdaq drops nearly 3%, Dow closes more than 300 points lower as tech rolls over

Fred Imbert, Alexandra Gibbs

U.S. stocks closed sharply lower on Tuesday, erasing earlier gains, as a decline in the broader tech sector brought the major averages down.
The Nasdaq composite fell 2.9 percent to 7,008.81 as shares of Apple and Amazon declined. The S&P 500 pulled back 1.7 percent 2,612.62, with tech sliding 3.5 percent and posting its worst day since Feb. 8. The Dow Jones industrial average closed 344.89 points lower at 23,857.71 and re-entered correction territory, with Microsoft as the worst-performing stock in the index. Earlier in the session, the Dow rose 243 points, while the S&P 500 and Nasdaq also traded higher.
Facebook shares contributed to tech's losses, as they fell 4.9 percent after Bank of America Merrill Lynch reduced its price target on the stock for the second time in five days. The cut comes as Facebook's fallout from the data scandal continues.
Last week, reports emerged alleging that Cambridge Analytica, an analytics company, had gathered data from 50 million Facebook profiles without users' permission. While Facebook has since come out to apologize and try to rectify the matter, concerns remain over data use.
CNN reported Tuesday that Facebook CEO Mark Zuckerberg will testify in front of Congress on the Cambridge Analytica leak.
"While this will not be a pleasant experience for Zuckerberg and his team going in front of Congress, it is a necessary smart strategic step for Facebook to head to the Beltway as the public fury continues to grow around the Cambridge data leak," Daniel Ives, head of technology research at GBH Insights.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City. Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.
Tech shares were also under pressure after Reuters reported Nvidia is temporarily suspending self-driving tests. The news sent the stock down 7.8 percent. Tesla shares also fell 8.2 percent after the U.S. National Transportation Safety Board announced it would investigate a fatal crash that took place last week.
Twitter fell 12 percent after short-seller Andrew Left said he is betting against the stock. "Everything's changed; everyone is talking about data privacy," Left told CNBC. "They're a lot more vulnerable than Facebook."
Netflix declined more than 6.1 percent. Stocks traded higher earlier in the session, extending sharp gains seen in the previous session as concerns over a trade war faded.
"We're still in an environment that's a bit hesitant, but yesterday was incredibly important," said Michael Hans, CIO at Clarfeld Financial Advisors.
Equities rallied sharply on Monday after the Wall Street Journal reported that U.S. and Chinese officials were working to ease trade tensions between the two countries. The major averages rose more than 2.5 percent, notching their best one-day gains since August 2015.
"We're seeing confidence being restored in the market and that's because of fading trade worries," said Peter Cardillo, chief market economist at First Standard Financial. Some investors "could come back in the market or renew long positions."
International markets also received a boost Tuesday after Wall Street's strong day, with both Asian and European indexes posting gains during their respective sessions.
"The market did what it needed to when it needed to on Monday, as the major indices logged historically strong bounces across the board," said Frank Cappelleri, executive director at Instinet. "This helped prevent large bearish patterns from breaking."
Stocks had been under pressure prior to Monday's rally as investors fretted over the economic implications of a trade war between the U.S. and China.
Last week, President Donald Trump signed an executive memorandum that would inflict tariffs on up to $60 billion in Chinese imports prompting China to retaliate. The Dow briefly dipped into correction territory following the news, while the S&P 500 reached its 200-day moving average, a key technical level.
But J.P. Morgan U.S. equity strategist Dubravko Lakos-Bujas said in a note Tuesday investors should buy after the recent dip.
"The market appears to be overreacting to sequential negative narratives …, we believe strong macro and fundamentals will continue to prevail," Lakos-Bujas wrote. "Most of the selling seen over this period has been largely technical …, and as such represents a buying opportunity for fundamental investors."
Bank of America Merrill Lynch said in a note Monday that its clients bought the dip seen last week. "Big net buys of US single stocks plus small inflows into ETFs led to total net buys of $3.0bn," the note said.