Stock Market News Today 2018/08/22
US and Europe cross economic turning point
Citi’s economic surprise index now more negative for US than single market. A turning point in this year’s economic story between the US and the eurozone has arrived and — if sustained — may well challenge Wall Street’s outperformance in 2018 and boost the euro.
Citi’s economic surprise index is now more negative for the US than the single market for the first time since the first quarter.
The respective indices measure economic data surprises relative to forecasts and, having surged well ahead since mid-February, the US index has stalled while the eurozone measure has steadily climbed off the canvas since mid-June.
Eurozone equities, led by banks, have lagged behind Wall Street for much of the year as the eurozone hit a soft patch during the spring.
Synchronised global growth was the main driver of markets at the start of 2018, which meant that the shift in the momentum of the growth trajectory became “the most importance influence of this year”, said Sandra Crowl, investment committee member of Carmignac, the European asset manager.
The divergent growth trajectories of the US and Europe have been a strong contributor to the dollar’s gains against the euro, and as Kit Juckes at Société Générale said, a shift in the surprise indices was a good reason for a euro recovery to $1.16.
The single currency has rebounded from a recent 14-month low of $1.13 and is now just shy of $1.16.
And while the S&P 500 is flirting with record territory and has become the longest bull market of all time, strength in recent months has come from a switch to defensive sectors such as staples, utilities and healthcare, hardly a reassuring sign. While the US economy grew at an annual rate of 4.1 per cent in the second quarter, the fastest clip in almost four years, and expectations for the third quarter are tracking well, Wall Street’s current leadership reflects a degree of anxiety over whether the market is poised for a bigger pullback.
Economists at TS Lombard note that the US economy “has yet to find reason for output to push above its 2014 highs, at least in the goods sector, and housing is beginning to soften”, and add that “Trump’s trade tactics should slow rather than accelerate activity, but they have yet to show through meaningfully in the macro data”.
UK outsourcer Capita to appoint Go-Ahead finance chief as CFO
Capita announced on Wednesday that it has chosen Go-Ahead’s finance chief as its new CFO, as the UK outsourcer pursues a turnround.
The group said it will appoint Patrick Butcher, currently Go-Ahead’s CFO, for the role. He will replace Nick Greatorex, who informed the board in July that he planned to resign. Mr Greatorex is to leave Capita on September 30.
Jon Lewis, Capita chief executive, said:
I am delighted to welcome Patrick to Capita. He is an accomplished Chief Financial Officer with first class strategic financial management experience developed over 25 years, including 19 years in finance director roles.
Mr Butcher has 19 years of experience as a finance director, Capita said.
Capita is in the process of a restructuring effort, following a profit warning earlier this year that dealt a severe blow to Capita’s market value. Outsourcers have been the subject of more intense scrutiny after the collapse of Carillion.
In a separate release, Go-Ahead said: “The board has begun a process to appoint a successor and a further announcement will be made in due course.
Stock rally eases as investors track political risk factors
Momentum from Wall Street bull run fades, dollar steady ahead of Fed minutes
>European bourses tick higher after mixed session in Asia.
>Wall Street futures point to opening slip as bull run nears record.
>Dollar holds around some of its lowest levels of the month as Fed minutes loom.
>Oil prices inch higher.
“The US administration’s implicit desire for a weaker dollar . . . consistent with its trade policy, will inevitably be self-fulfilling over the medium-term” — Viraj Patel, FX strategist, ING.
“Constant criticism of the Federal Reserve may keep a downside skew in US rates markets when it comes to pricing in policy tightening and, on the margin, this will help to keep dollar strength at bay.”
European stocks are easing back as momentum from Wall Street’s record-breaking bull run fades, with investors measuring a growing roster of political risk factors.
As attention turns to the Federal Reserve — with minutes from its last monetary policy meeting due out later in the session — the dollar index is holding around some of its lowest levels of the month. The pressure came in line with criticism of the US central bank’s rate tightening cycle from the White House.
Political drama in Washington is adding to the sense of caution.
The legal proceedings against members of President Trump’s inner circle resulted in a guilty plea from Michael Cohen and saw the conviction of Paul Manafort in separate cases.
Frankfurt’s Xetra Dax 30 is down 0.1 per cent and the Europe-wide Stoxx 600 is down 0.2 per cent. London’s FTSE 100 is down 0.4 per cent, underperforming with the pound back up at some of its highest levels of the month.
Stocks were mixed in Asia after the S&P 500 touched a new record intraday high at 2,873.23. Wall Street’s bull run stands on the brink of becoming the longest ever continuous expansion without being interrupted by a 20 per cent drop in prices.
Tokyo’s Topix rose 0.8 per cent as the energy segment climbed 1.9 per cent and tech stocks rose 0.9 per cent. Seoul’s Kospi index was also up 0.3 per cent.
In Hong Kong the Hang Seng was up 0.5 per cent as tech stocks rose 2.4 per cent and financials jumped 0.5 per cent. But China’s CSI 300 index of key Shanghai and Shenzhen-listed stocks fell 0.5 per cent.
Sydney’s S&P/ASX 200 fell 0.4 per cent as financials shed 0.7 per cent and the mining segment dropped 1.1 per cent, offsetting gains elsewhere.
Forex and fixed income:
The euro is steady at $1.1563, with the pound steady at $1.2896.
The Australian dollar is off 0.2 per cent at $0.7351 after Prime Minister Malcolm Turnbull prepared for a possible second leadership challenge from Peter Dutton, his former home affairs minister.
Japan’s yen is 0.1 per cent weaker at ¥110.42 per dollar.
The yield on 10-year US Treasuries is down 1 basis point at 2.823 per cent amid demand for the debt.
Brent crude, the international oil benchmark, is up 0.6 per cent at $73.06 a barrel while US marker West Texas Intermediate is up 0.6 per cent at $66.23, with prices lifted by expectations of a reduction in stockpiles.
Gold is down 0.2 per cent at $1,192.81 per ounce.