China rebounds on trade hopes as Japan slips more than 2 percent
The Chinese mainland markets rebounded strongly after an earlier slip. The Shanghai composite bounced about 2.05 percent higher to close at around 2,514.87 and the Shenzhen composite jumped 2.658 percent to finish its trading day at approximately 1,279.49. The Shenzhen component rose 2.756 percent to close at about 7,284.84.
Hong Kong’s Hang Seng index extended gains to rise about 2 percent, as of its final hour of trade.
The positive moves in China came after the country’s commerce ministry announced that vice ministerial level trade talks with the U.S. would be held on Jan. 7-8.
The development on the trade front was also bolstered by positive data from China’s services sector. The Caixin/Markit services purchasing managers’ index jumped to a six-month high of 53.9 in December, rising from 53.8 in the previous month. The figure was significantly higher than the 50.0 mark which separates expansion from contraction.
The data came days after China reported a decline in its factory activity for December.
South Korea’s Kospi also recovered from its earlier losses to close 0.83 percent higher at 2,010.25.
Japan’s Nikkei 225, however, dropped 2.26 percent to close at 19,561.96 while the Topix index fell 1.53 percent to finish the trading day at 1,471.16, with most sectors seeing declines. Shares of Japanese conglomerate Softbank fell 2.89 percent and Fast Retailing, the company behind the Uniqlo chain of apparel stores, dropped 5.45 percent. Stocks in Japan were closed on Wednesday and Thursday for holidays.
Australia stocks fell as the benchmark ASX 200 slipped 0.25 percent to close at 5,619.4.
The heavily-weighted financial subindex declined 0.34 percent as shares of the country’s so-called Big Four banks were mixed; Australia and New Zealand Banking Group slipped 0.37 percent and Westpac saw losses of 0.04 percent. National Australia Bank, on the other hand, recovered from earlier losses to rise 0.21 percent while Commonwealth Bank of Australia was slightly higher.
“For the brave, now would be a good time to be looking at ... some of these markets,” Stefan Hofer, a managing director and chief investment strategist at LGT Bank Asia, told CNBC’s “Squawk Box” on Friday. Hofer added that liquidity and trading volumes are “still quite thin at the outset of the year.”
“Fundamentally speaking, I think if we do have a trade deal with China, let’s say, by the middle of 2019, then Asia ... will be the place to be in terms of equities,” he said, adding that the ongoing U.S.-China trade war has been “the major overhang that has been a problem” for Asian markets.
Asia-Pacific Market Indexes Chart
|NIKKEI||Nikkei 225 Index||NIKKEI||19561.96||-452.81||-2.26|
|HSI||Hang Seng Index||HSI||25626.03||561.67||2.24|
|ASX 200||S&P/ASX 200||ASX 200||5619.40||-14.00||-0.25|
|CNBC 100||CNBC 100 ASIA IDX||CNBC 100||7241.26||24.09||0.33|
The Dow Jones Industrial Average plunged 660.02 points, or 2.8 percent, to close at 22,686.22. At its session low, the Dow fell more than 700 points. The S&P 500 shed 2.47 percent to finish at 2,447.89 while the Nasdaq Composite dropped 3 percent to close at 6,463.50.
The market sell-off was led by Apple, which saw its stock plunge almost 10 percent after cutting its revenue guidance on Wednesday —its worst session since 2013. The iPhone maker attributed most of the predicted revenue shortfall for struggling business in China.
The decline in stocks stateside was accelerated by a weaker-than-expected reading on the U.S. manufacturing sector. ISM’s manufacturing index fell to 54.1 in December, economists polled by Refinitiv expected 57.9.
The disappointing economic data from the world’s two largest economies come at a time when officials from the U.S. and China are attempting to strike a deal on trade, after placing a series of punitive tariffs on each other’s goods.
The Japanese yen, widely viewed as a safe-haven currency, traded at 107.99 against the dollar after rising sharply on Thursday to levels below 106. The Australian dollar was at $0.7024 after seeing an earlier low of $0.6991.
— Reuters and CNBC’s Fred Imbert contributed to this report.
European stocks close higher as the US and China agree to hold trade talks
European Markets: FTSE, GDAXI, FCHI, IBEX
Basic resources stocks — with their heavy exposure to China — were the top gainers in Europe after China’s commerce ministry said the U.S. and China would hold vice-ministerial level negotiations over trade in Beijing on Jan. 7-8. Auto stocks were also among the top gainers. This is a sector highly sensitive to trade dynamics.
Looking at individual stocks, shares in Bayer rose after a U.S. judge moved to limit evidence in a trial over allegations that Monsanto’s glyphosate-based weed killer Roundup causes cancer. The German pharmaceuticals firm bought U.S. agriculture giant Monsanto last year for $63 billion. Shares of Bayer were up 6.4 percent.
On the other end, media group ProSiebenSat.1 Media SE slumped to the bottom of the Stoxx 600 after Morgan Stanley cut its price target for the stock to 11.20 euros, down from 15.60 euros. The firm’s share price fell nearly 4 percent.
Sainsbury’s also fell into the red after Jefferies, HSBC and Bernstein cut their price targets for the stock. Shares sank 1.5 percent.
In the meantime, the latest nonfarm payroll numbers surprised traders, with an increase of 312,000 in December from 155,000 in November. The dollar rose on the back of the fresh data.
In corporate news, troubled Italian lender Banca Carige is exploring the use of a 320 million euro ($364.6 million) convertible bond to boost capital and avoid the use of taxpayers’ money, Fabio Innocenzi, formerly the bank’s chief executive, said Thursday in an interview with Class CNBC. Innocenzi was one of three temporary administrators appointed by the European Central Bank to take control of the lender earlier this week.
In terms of data, British house prices in December fell 0.7 percent from the previous month, the biggest monthly fall since July 2012, according to Nationwide.
IHS Markit’s euro zone composite final PMI fell to 51.1 in December, down from 52.7 in the previous month. The euro zone December inflation rate, meanwhile, fell steeper than was expected, to 1.6 percent, down from November’s 1.9 percent.
Elsewhere, traders are looking ahead to a joint discussion with Federal Reserve Chairman Jerome Powell and former Fed chiefs Janet Yellen and Ben Bernanke, due to take place at 10:15 a.m. ET. The U.S. central bank raised interest rates four times in 2018, however expectations for the Fed to pause rate rises — or even cut rates — have increased amid fears around slowing global economic growth.
Dow jumps more than 700 points, propelled by Powell's comments and a blowout jobs report
At 8:30 a.m., the Labor Department said the U.S. economy added 312,000 jobs in December. That blew past an expectation of 176,000 jobs. Later on Friday morning, Federal Reserve Chairman Jerome Powell said the central bank will be patient in raising rates, quelling fears of tighter monetary policy in the near future.
The Dow Jones Industrial Average closed 746.94 points higher at 23,433.16, or 3.3 percent, and briefly rose more than 800 points. The S&P 500 rallied 3.4 percent to 2,531.94, with the tech sector gaining more than 4 percent. The Nasdaq Composite climbed 4.26 percent to 6,738.86. This was a rebound from Thursday’s plunge, which was triggered by a massive drop in Apple’s stock.
Stocks took off after Powell hinted the central bank could pause its rate hikes, something this beaten-down market was waiting for. “As always, there is no preset path for policy, ” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.”
Drew Angerer | Getty Images
“I think he did what the market hoped he would do,” said Tom Essaye, founder of The Sevens Report. “What he did with these comments is he acknowledged that they need to be more flexible.”
“This is worth a bounce, but at the same time, the major issues facing the market are not resolved. We have a potential earnings problem in this market; we have a potential economic growth problem in this market,” Essaye added. “Today’s rally is more a result of the overextended downside from yesterday.”
Boeing led the Dow higher after the jobs reported lessened fears that the economy was slowing down. Shares of the plane maker surged 5.2 percent.
“We created jobs across the board; I don’t think most of it was seasonal,” said JJ Kinahan, chief market strategist at TD Ameritrade. “But the most interesting thing on this report was the amount of people who left their jobs voluntarily. I think that’s a really good consumer-confidence measure.”
“As much as we all got nervous about Apple yesterday … this puts a counter to that,” he added.
Gains in tech-related names also boosted the broader market. Netflix and Intel rose 9.7 percent and 6.1 percent, respectively. Netflix rose after Goldman Sachs added the streaming service to its conviction buy list. Analyst Heath Terry called Netflix “one of the best risk/reward propositions in the Internet sector. ” Dow-member Intel rose after Bank of America Merrill Lynch upgraded it to buy from neutral.
The gains in Netflix and Intel also lifted other tech-related stocks. Facebook, Amazon, Apple and Google-parent Alphabet all rose more than 4 percent. The Technology Select Sector SPDR fund, which tracks the S&P 500 tech sector, gained 4.4 percent.
Tech’s move higher took place after the sector fell 5.07 percent on Thursday, its worst daily performance since Aug. 18, 2011, when it fell 5.35 percent. The sharp move lower was triggered by a dire quarterly warning from Apple, which propelled the tech giant’s stock to its worst day in six years and dampened market sentiment across the world. Apple slashed its fiscal first-quarter revenue guidance earlier this week, citing an unexpected slowdown in China.
The announcement comes as China and the U.S. try to strike a deal on trade. China’s commerce ministry said the U.S. and Chinese would hold vice-ministerial level negotiations over trade in Beijing on Jan. 7-8.
—CNBC’s Silvia Amaro contributed to this report.