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Dec 20, 2018

Asia, Europe & US at Close Report


Chinese banks drag Shanghai lower; Japan slips more than 2.5 percent

Eustance Huang

Stocks in Asia were broadly lower on Thursday after the U.S. Federal Reserve raised interest rates for the fourth time in 2018.
The mainland Chinese markets were mixed on the day, with the Shanghai composite slipping 0.52 percent to close at about 2,536.27 and the Shenzhen composite recovering from earlier losses to end the trading day up by 0.202 percent at around 1,297.10.
China’s central bank decided to keep short-term borrowing rates steady on Thursday, a day after announcing measures to encourage lending to small firms.
Following the People’s Bank of China’s move to spur lending to small businesses, Shanghai-listed shares of major banks declined as Industrial and Commercial Bank of China fell 1.88 percent, Agricultural Bank of China shed 0.57 percent and China Construction Bank dropped 2.14 percent. Financial stocks make up nearly 40 percent of the Shanghai composite.
Hong Kong’s Hang Seng index fell 1.05 percent, as of its final hour of trade, with Hong Kong-listed shares of HSBC declining by around 1 percent.
Meanwhile, Japan’s Nikkei 225 slipped 2.84 percent to close at 20,392.58 while the Topix index declined by 2.51 percent to finish the trading day at 1,517.16. Shares of conglomerate Softbank Group continued to remain under pressure on Thursday as they slipped 4.72 percent, a day after the lackluster public debut of its mobile unit on Wednesday.
Shares of the newly listed Softbank Corp fell as much as 8 percent earlier on Thursday, according to Reuters, before recovering to see gains of 1.09 percent on the day.
Meanwhile, South Korea’s Kospi shed 0.9 percent, as shares of LG Electronics declined by 4.13 percent. John Ko, an analyst at NH Investment and Securities, estimated a 15 percent year-on-year decline in fourth quarter operating profit for LG Electronics, citing weakness in sectors such as its television and smartphone divisions.
And in Australia, the ASX 200 fell 1.34 percent to close at 5,505.8, with shares of the country’s so-called Big Four banks seeing declines. Australia and New Zealand Banking Group fell 1.63 percent, National Australia Bank slipped 0.99 percent, Commonwealth Bank of Australia shed 0.69 percent and Westpac lost 1.07 percent.
Semiconductor-related companies hit
Shares of semiconductor-related companies saw significant declines on Thursday, with chipmakers SK Hynix and Taiwan Semiconductor Manufacturing Co. declining 2.82 percent and 2 percent, respectively.
Over in Japan, Tokyo Electron, which manufactures semiconductor equipment, was down 4.3 percent while semiconductor test equipment manufacturer Advantest fell 3.91 percent.
The moves in the sector came after shares of American chipmaker Micron Technology plunged almost 8 percent on Wednesday, a day after it lost more than 6 percent in after-hours trading on Tuesday following a revenue miss.
Despite the dismal performance of the stock, Sanjay Mehrotra, president and CEO of Micron, told CNBC’s “Mad Money” in an exclusive interview on Wednesday that “end-market demand drivers for memory and storage continue to be vibrant.

Asia-Pacific Market Indexes Chart

NIKKEINikkei 225 IndexNIKKEI20392.58-595.34-2.84
HSIHang Seng IndexHSI25623.53-241.86-0.94
ASX 200S&P/ASX 200ASX 2005505.800.000.00
KOSPIKOSPI IndexKOSPI2060.120.000.00
CNBC 100CNBC 100 ASIA IDXCNBC 1007252.43-73.00-1.00
Fed hikes rates
Overnight on Wall Street, the major indexes hit new closing lows for 2018. The Dow Jones Industrial Average dropped 351.98 points to close at 23,323.66 while the S&P 500 shed 1.5 percent to end the trading day at 2,506.96. The Nasdaq Composite fell 2.1 percent to close at 6,636.83.
That came on the back of the Fed raising its benchmark interest rate by a quarter point to a target range between 2.25 to 2.5 percent, in a widely anticipated move.
The move marked the fourth increase this year by the U.S. central bank and the ninth since it began normalizing rates in December 2015. It came despite President Donald Trump’s tweets against rate hikes. On Monday, he said “it is incredible” that “the Fed is even considering yet another interest rate hike” amid the turmoil outside of the U.S.
Officials, however, now project two hikes next year, which is a reduction but still ahead of current market pricing of no additional moves next year.
The language in the post-meeting statement was also not entirely dovish, or easy on its outlook for rates. The committee continued to include a statement that more rate hikes would be appropriate, though it did soften the tone a bit.
“What was a bit surprising is that the post (meeting) statement says that ‘some further gradual increases (my emphasis) in the target range for the federal fund rate will be consistent….”. The expectation here was that all reference to ‘gradual’ could be dropped, significantly a formal end to the Fed being on ‘auto-pilot’ with respect to its rate rise cycle to date, as long as the economy and inflation were broadly performing as expected,” Ray Attrill, head of foreign exchange strategy at National Australia Bank, said in a morning note.
“We’d nevertheless judge that the Fed has now moved into fairly full-blown ’data dependency mode,” Attrill said.
Central bank meetings will be in focus today. The Bank of Japan on Thursday announced its the widely expected decision to keep interest rates targets unchanged amid global risks. The Bank of England will also be meeting on Thursday — analysts are not expecting any changes to interest rates.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.656 after seeing a high of 97.041 earlier in the session.
The Japanese yen, widely viewed as a safe-haven currency, traded at 111.84 after seeing an earlier low of 112.60. The Australian dollar was at $0.7107 after declining from levels around $0.72 yesterday.
— CNBC’s Yen Nee Lee , Chery Kang and Jeff Cox contributed to this report.


Europe finishes deep in the red, with stocks hitting a 2-year low; Airbus falls 4.5%

David Reid,Chloe Taylor,Alexandra Gibbs

European markets closed Thursday's trade deep in the red, echoing the negative sessions seen in markets overseas.
Falling to its lowest since at least December 2016, the pan-European STOXX 600 finished down 1.45 percent, with all major sectors posting sharp losses.
Looking at bourses in the region, the FTSE 100 slipped 0.8 percent, while the French CAC 40 and German DAX extended losses, down 1.78 and 1.44 percent respectively. All peripheral markets closed sharply lower too.

European Markets: FTSE, GDAXI, FCHI, IBEX

FTSEFTSE 100FTSE6711.93-54.01-0.80931209357
Looking across Europe, autos, banks, basic resources, technology and travel all saw sectoral drops of 2 percent or more each by the close. The retail sector also hit fresh lows, plummeting to its lowest since October 2014 during the session. Inditex, Next and Dufry AG were some of the sector's worst performers, all closing down 3 percent each or more.
Europe's basic resources led the losses, down 2.74 percent by the close after the U.S. Treasury said it will lift sanctions on aluminum giant Rusal. Antofagasta, Boliden and ArcelorMittal all posted sharp losses, all ending trade down more than 3.5 percent each.
Energy stocks came under pressure, as both Brent and U.S. light crude fell over 4 percent each around Europe's close, as concerns surrounding oversupply and the outlook for the market's demand weighed.
Looking at individual stocks, Airbus shares slumped 9 percent Thursday morning on reports the company is being investigated by the U.S. Department of Justice (DOJ) for "inappropriate practices." By the market close, shares had pared losses to sit 4.44 percent lower.
The STOXX 600's biggest loser was Carnival, which dropped 10.83 percent after posting its latest earnings update. In the release, the cruise operator said that it expected adjusted earnings per share for 2019's first quarter to be between 40 cents and 44 cents; below analyst estimates of 45 cents per share, Reuters reported.
Central bank influence
Switching focus, central banking news has remained in focus on Thursday. During the session, the Bank of England (BOE) held interest rates steady, with the U.K.'s economic outlook highly uncertain less than 100 days before the country leaves the European Union.
As widely expected the BOE's nine-member Monetary Policy Committee (MPC), led by Mark Carney, unanimously voted to leave interest rates unchanged at 0.75 percent.
Stateside, officials at the Federal Reserve voted to hike interest rates by 0.25 percent on Wednesday, although President Donald Trump had been pressing the central bank for a more dovish policy outlook.
Following that Fed move, Asian markets saw shares slide on Thursday, meantime Wall Street extended its losses, with the Dow tumbling some 300 points around Europe's close.


Dow drops 470 points to 14-month low in second day of big losses following Fed rate hike

Thomas Franck

U.S. stocks swooned for a second day Thursday after the Federal Reserve raised benchmark interest rates and said that it would continue to let its massive balance sheet shrink at the current pace. Fears of a government shutdown also sent stocks tumbling to new lows Thursday afternoon.
The Dow Jones Industrial Average fell 500 points, bringing its two-day declines to more than 800 points and its 5-day losses to more than 1,700 points. The S&P 500 fell 1.7 percent as technology stocks underperformed. The Nasdaq Composite also fell 1.6 percent, into bear market territory amid big losses in Amazon and Apple. Companies in the S&P 500 have lost a total of $2.39 trillion in market cap this month. The Cboe Volatility Index — one of the market's best gauges of marketplace fear — rose above 30.
Stocks fell to the low for the day after U.S. House of Representatives Speaker Paul Ryan announced that President Donald Trump would not sign a temporary government funding resolution.

The moves Thursday came one day after the Fed decided to hike its benchmark overnight lending rate by one quarter point in the prior session. The Dow fell more than 350 points following the Fed's decision and pushed the major indexes to new lows for the year.
Commenting on the central bank's decision, renowned hedge fund manager David Tepper said in an email to CNBC's Joe Kernen that Powell "basically told you the Fed put is dead " and that "cash is not so bad" as an investment.
"The Fed doesn't care about the stock market within 400 SPX (S&P 500) points," Tepper added in the email. "It's the real economy, stupid."
For traders, the Fed's statement and Chairman Jerome Powell's subsequent press conference did not suggest that the central bank would slow its pace of rate hikes as quickly as some had hoped. Many market participants cited the Fed's decision to allow its balance sheet to run off at its current pace as reason for the market volatility.
"We, too, were very vocal in recommending heavily that the Fed not hike yesterday," said Julian Emanuel, chief equity strategist at BTIG.
"This is all about the speed of things," Emanuel added. "The problem with ignoring the consequences of the balance sheet reduction really tells you that the Fed is not paying attention to that fact that financial markets correct much more rapidly on the downside than they do in bull markets to the upside."
The Fed currently is allowing $50 billion a month to run off its massive debt balance sheet as its securities mature. The balance sheet is mostly a collection of bonds the central bank purchased to vitalize the economy during and after the financial crisis.
Traders work on the floor of the New York Stock Exchange on January 5, 2017.
Getty Images
he U.S. Senate on Wednesday approved funds for several federal agencies to keep them operating through Feb. 8 without the $5 billion to build a wall on the U.S.-Mexico border that President Donald Trump had demanded. House Speaker Paul Ryan announced Thursday afternoon that Trump will not sign the temporary funding bill without funding for the wall.
"We've seen this movie before. ... For Trump, he needs to be the center of attention," said Maris Ogg, president at Tower Bridge Advisors. "If he threatens to veto, it puts him at the center of attention, but will he actually do it? I doubt it."
"There are only three things that matter: earnings, interest rates, and the dollar," she added. "I think the more concerning thing is that we're starting to see in earnings announcements that it seems as if the momentum is slowing in more industries than even a month ago."
Also weighing on sentiment Thursday, the Trump administration and more than a dozen international allies condemned Beijing for what the coalition views as continued efforts by the Chinese to steal other countries' trade secrets.
The mass reprimand against China's actions represents a growing view that the Asian nation is defying international norms of fair economic practice. The U.S. and China are in the middle of a bitter trade dispute, with both nations slapping tariffs on billions of dollars worth of each others' imported goods.
The market's has more to do with tax loss selling and forced redemptions, said Peter Boockvar, chief investment officer at Bleakley Advisory Group. Boockvar added that the shutdown is not a factor and that the S&P broke through February's lows.
It's in "no man's land," he said.
—CNBC's , and Gina Francolla contributed reporting.

Source: CNBC

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