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Mar 25, 2019

Asia | Europe & Wall Street Closing Report on March 25, 2019


Stocks in Asia plummet amid recession fears; Japan falls around 3 percent

Eustance Huang

Shares in Asia fell sharply on Monday after disappointing economic data from Europe and a closely-watched signal of potential recession in the U.S. appeared on Friday.
The broader MSCI Asia-ex Japan index fell 1.65 percent to 521.00, as of 3:28 p.m. HK/SIN.
The Nikkei 225 plunged 3.01 percent to close at 20,977.11, as shares of index heavyweights Softbank Group and Fanuc plummeted 5.01 percent and 3.84 percent, respectively. The Topix index also fell 2.45 percent to finish its trading day at 1,577.41.
Shares in mainland China tumbled on the day, with the Shanghai composite dropping 1.97 percent to 3,043.03 and the Shenzhen component declining 1.8 percent to 9,701.70. The Shenzhen composite fell 0.908 percent.
Meanwhile, the Hang Seng index in Hong Kong dropped 1.98 percent in its final hour of trading, with shares of Chinese tech giant Tencent falling more than 3 percent.
In South Korea, the Kospi declined 1.92 percent to close at 2,144.86 as chipmaker SK Hynix saw its stock plunge 4.2 percent.
In Australia, the ASX 200 fell 1.11 percent to close at 6,126.20.
Stocks in Thailand fell as the SET index declined around 0.8 percent in afternoon trade after tumbling 1 percent earlier, its largest intraday decline in over a month, according to Reuters. The move came ahead of the release of results from the country’s first election since a 2014 coup that saw a military government seizing power.

Asia-Pacific Market Indexes Chart

NIKKEINikkei 225 IndexNIKKEI20977.11-650.23-3.01
HSIHang Seng IndexHSI28523.35-590.01-2.03
ASX 200S&P/ASX 200ASX 2006126.200.000.00
KOSPIKOSPI IndexKOSPI2144.86-42.09-1.92
CNBC 100CNBC 100 ASIA IDXCNBC 1007914.33-135.68-1.69
Fears of a recession
Stocks stateside fell sharply on Friday as an inverted yield curve stoked fears that an economic recession is on the horizon. Disappointing economic data released Friday out of Europe, coupled with a downgraded economic outlook from the Federal Reserve, added to those concerns.
The spread between the 3-month Treasury bill and the 10-year note went negative on Friday for the first time in more than a decade. Investors consider this to be a signal that a recession may be coming soon.
The inversion in the yield curve was described by one group of strategists as the “biggest development in financial markets for some time.”
“While we prefer the ten‑year minus two‑year measure of the yield curve for predicting U.S. economic recessions some twelve‑to‑eighteen months in advance, the inversion of the tens‑bills curve is an ominous sign,” strategists at the Commonwealth Bank of Australia said in a morning note.
“At this stage, we are not predicting a U.S. recession, but we have already concluded and published that the Fed’s tightening cycle is finished,” they said.
An inverted yield curve occurs when short-term rates surpass their longer-term counterparts, putting a damper on bank lending profits. An inverted curve is also considered a recession indicator.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.613 after bouncing from lows below 96.3 in the previous session.
The Japanese yen, widely viewed as a safe-haven currency, strengthened to 110.05 against the dollar from lows above 110.6 last Friday. The Australian dollar changed hands at $0.7083 after seeing highs above $0.714 last week.
Meanwhile, top U.S. officials from Washington are also set to visit Beijing later this week to resume trade negotiations with China.
China and the U.S. are expected to strike a deal sometime in April, with the uncertainty surrounding the trade fight between the two economic powerhouses weighing on investor sentiment for much of 2018.
Oil prices slipped in the afternoon of Asian trading hours, with the international benchmark Brent crude futures contract shedding 0.49 percent to $66.70 per barrel. U.S. crude futures also declined 0.66 percent to $58.65 per barrel.
— CNBC’s Fred Imbert contributed to this report.


European stocks close lower amid growing recession worries; LVMH shares fluctuate after 'fat finger' trade

Chloe Taylor,Ryan Browne

European shares closed lower on Monday, amid rising fears of an impending U.S. recession and fresh uncertainty around Brexit just days before Britain’s scheduled departure from the EU.

European Markets: FTSE, GDAXI, FCHI, IBEX

FTSEFTSE 100FTSE7177.58-30.01-0.42604298648
The pan-European Stoxx 600 was provisionally 0.42 percent lower by the end of the session, with most sectors and all major bourses in the red.
Market jitters have grown recently over increasing signs of slowing economic growth and a possible recession. German manufacturing contracted for the third month in a row, IHS Markit data showed Friday, dragging the yield on the 10-year bond into negative territory for the first time since October 2016.
The U.S. yield curve — which plots bond yields from shortest maturity to highest and is considered a barometer of economic sentiment — inverted for the first time since mid-2007 on Friday.
Looking at individual stocks, LVMH initially dropped 8.8 percent before paring back losses. Reuters reported that the substantial drop at the start of the session was due to an erroneous “fat finger” trade, where a misclick leads to a trade that was larger than expected or made on the wrong stock. Shares of the French luxury goods maker later rallied and were trading 1.36 percent higher at the closing bell.
Bayer, meanwhile, saw its shares fall almost 3 percent after a downgrade from Bank of America Merrill Lynch. The pharmaceutical firm’s chief executive recently said its supervisory board continues to support management, after a U.S. jury ruled against the company in a trial over its Roundup weed killer.
At the other end of the scale, British satellite maker Inmarsat surged to the top of the index after it emerged that a private equity-led consortium had agreed to buy the firm for around $3.4 billion. Shares gained 9.64 percent on the back of the news.
Meanwhile, shares on Wall Street were flat on Monday as investors weighed global growth concerns against the outcome of Robert Mueller’s two-year probe into President Donald Trump. Attorney General William Barr said Sunday the probe found no sufficient evidence of collusion between the Trump campaign and the Kremlin.
The news is likely to be a boon to Trump, who has long called the inquiry a “witch hunt” and claimed there was “no collusion” between his presidential campaign and Moscow.
Back in Europe, Brexit remains a talking point, with reports of a plot to oust U.K. Prime Minister Theresa May surfacing over the weekend. The British leader met with senior ministers and Brexit-supporting lawmakers on Sunday to discuss the planned departure from the European Union.
The EU has offered the U.K. an extension to the Brexit date, but the length of such a delay depends on whether May’s twice-rejected divorce deal can gain the support of lawmakers.


Dow rises after Trump's Mueller win, but gain capped as economic fears persist

Fred Imbert,Silvia Amaro ,Eustance Huang

The Dow Jones Industrial Average eked out a small gain on Monday after news that the special counsel found no collusion with Russia on the part of President Donald Trump. However, gains in the broader market were capped as worries over the global economy lingered.
The 30-stock Dow closed 14.51 higher at 25,516.83 as Boeing outperformed. The S&P 500 declined 0.1 percent to 2,798.36, led lower by the financials and tech sectors. The index also closed below 2,800 for the first time since March 12. The Nasdaq Composite also pulled back 0.1 percent to 7,637.54.
Worries over the global economic outlook were stoked on Friday and lingered through Monday after the so-called yield curve inverted for the first time in more than a decade. The 3-month Treasury bill yield topped its 10-year counterpart on Friday, thus inverting the yield curve. Investors consider this to be a signal that a recession may be coming soon. Disappointing economic data released Friday out of Europe, coupled with a downgraded economic outlook from the Federal Reserve, added to those concerns.
The yield curve inverted again on Monday as the benchmark 10-year yield hit its lowest level since December 2017.
“Economies in Europe and China continue to deteriorate causing uneasiness that the problems overseas could affect the U. S. markets,” Bruce Bittles, chief investment strategist at Baird, wrote in a note. “There are signs that our economy is not as robust as last year such as the decline in capital spending in the third and fourth quarters of last year.”
Equities alternated between gains and losses for most of Monday as investors also digested comments from Attorney General William Barr. On Sunday, he said special counsel Robert Mueller’s long-awaited investigation did not find enough evidence that Trump ’s 2016 campaign colluded with Russia.
In a letter to top lawmakers, Barr wrote:
“The Special Counsel’s investigation did not find that the Trump campaign or anyone associated with it conspired or coordinated with Russia in its efforts to influence the 2016 U.S. presidential election.”
The White House also said the results are a “total and complete exoneration of the president of the United States. ”
Mueller’s investigation had been a lingering concern for investors as it could have hindered Trump’s efforts to further cut taxes and further ease regulations on corporations. The news removes a worry for Wall Street and can help the administration focus on more pressing issues for the market, such as striking a trade deal with China or even working with Democrats on an infrastructure plan.
“This cloud has now dissipated and this should allow markets to breathe a sigh of relief,” said Jeff Kilburg, CEO of KKM Financial. “This could be a real positive for the market if it allows Trump to focus on getting the Chinese trade deal concluded.”
The investigation nagged the Trump administration for nearly two years. It led to the indictment and arrest of several Trump’s operatives, including ex-campaign manager Paul Manafort. Manafort was sentenced to 47 months in jail for fraud earlier this month.
Investors across the world worried the probe could also bring down Trump himself by potentially leading to his impeachment. Now, Wall Street can remove one block from the proverbial wall of worry and eye the ongoing U.S.-China trade talks.
China and the U.S. are expected to strike a deal sometime in April. Sentiment around the negotiations improved this year to help lift stocks to within striking distance of their record highs set last year. White House press secretary Sarah Huckabee Sanders said Saturday that Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer were headed to Beijing for further talks on Thursday. Trade worries plagued investors for most of last year as they worried a prolonged trade war between the world’s largest economies could hinder corporate profits.
Caterpillar shares rose more than 1 percent on Monday. The stock is seen by investors as a bellwether for trade conditions.
The S&P 500 is up more than 30 percent since Trump was elected in 2016. One key catalyst for the move higher in that time is a massive corporate tax cut signed by Trump in late 2017.
“Trump will remain in the White House until the 2020 elections, which means that the Trump tax rates will remain in until at least 2021,” said John Rutledge, chief investment officer at Safanad. “The positive effect on the market will be obscured, however, by the recent ugly economic news that made the Fed cave and inverted the yield curve. All in all, I think people will be buying defensive and income stocks.”
Apple shares fell 1.2 percent as the tech giant held an event in which it announced services such as a new news app, a video streaming platform, its own credit card and a bundle of video games.
Boeing shares climbed 2.3 percent after the company said pilots from U.S. carriers were testing a software update for its 737 Max jet, its best-selling plane. Earlier this month, an Ethiopian Airlines flight operated with a 737 Max plane crashed. It was the second crash involving the plane in less than six months.
—CNBC’s Tom Franck and Kate Rooney contributed to this report.

Source: CNBC

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