Market Update
Euro Area GDP Growth Rebounded In First Quarter, Industrial Production Eased In March
Bridgette Randall
15 May, 2024
Frankfurt
European market indexes advanced and extended further into record territory after the release of the GDP, employment, and industrial production data.
Benchmark indexes in Paris, London, and Frankfurt advanced between 0.2% and 0.5%, and the euro strengthened against the dollar and other leading currencies.
The Eurozone Economy Expands in the First Quarter
Seasonally adjusted GDP in the first quarter rose 0.3% from the previous quarter, Eurostat, the statistical office of the European Union, reported in its flash estimate on Wednesday.
The economy expanded in the first quarter after shrinking in the previous two quarters in a row by 0.1%, when measured on a quarterly basis.
GDP in the first quarter rose 0.4% from a year ago, faster than the 0.1% annual increase in the fourth quarter of 2023.
GDP in Germany contracted for the third quarter in a row by an annual 0.2%, in France it expanded by 1.1%, in Spain by 2.4%, and in Italy by 0.6%.
Ireland led the currency union with a decline of 4.9%, Estonia by 2.1%, and Austria by 1.3%.
Employment Growth Slowed In the First Quarter
The statistical agency also said the number of employed persons in the eurozone increased by 0.3% from the previous quarter to 169.8 million.
From a year ago, the total number of people on the payroll increased by 1.0%, slower than the 1.2% increase in the fourth quarter.
Employment in Germany increased by 0.2%, in France by 0.2%, and in Italy by 0.3%.
Eurozone Industrial Production Eased in March
Seasonally adjusted industrial production rose 0.6% from the previous month in March, according to the first estimate released by the statistical agency on Wednesday.
On an annual basis, industrial production declined by 1.0% in both the Euro Area and the European Union.
Industrial production of energy decreased by 3.5%, intermediate goods fell by 2.3%, durable consumer goods dropped by 8.3%, non-durable consumer goods declined by 7.0%, and capital goods increased by 1.8%.
The largest annual decreases in industrial production were recorded in Finland by 7.7%, in Bulgaria by 7.6%, and in Austria by 7.0%.
The largest increases were observed in Ireland by 37.0%, in Cyprus by 8.5%, and in Romania by 3.5%.
Europe Indexes and Yields
The DAX index increased by 0.5% to 18,810.12; the CAC-40 index rose by 0.2% to 8,213.46; and the FTSE 100 index inched higher by 0.3% to 8,451.14.
The yield on 10-year German bonds edged down to 2.47%; French bonds inched lower to 2.98%; the UK gilts edged lower to 4.11%; and Italian bonds inched lower to 3.80%.
The euro edged higher to $1.082; the British pound inched higher to $1.252; and the U.S. dollar eased to 90.50 Swiss cents.
Brent crude increased $0.10 to $82.48 a barrel, and the Dutch TTF natural gas rose by €0.50 to €30.23 per MWh.
Europe Stock Movers
InPost increased 10.4% to €16.83 after the Polish parcel delivery company reported that its first quarter core profit surged by 36%.
ABN AMRO Bank declined 3% to €16.18 after the Dutch bank reported weaker capital ratios in the first quarter following the rise of risk-weighted assets, which overshadowed strong earnings.
The bank's CET 1 ratio, a measure of the bank's own capital to risk-weighted assets, decreased to 13.8% in the first quarter from 15.0% a year ago.
Net interest income in the quarter decreased 2% from a year ago to €1.59 billion, and the bank guided 2024 to a net interest income of €6.3 billion.
One of the three largest banks in the Netherlands said higher staffing expenses are likely to increase total costs to €5.3 billion.
However, the bank's profit in the first quarter increased by 29% to €674 million, ahead of the market estimate of at least €510 million.
The bank also confirmed the completion of the €500 million stock buyback plan it launched in February.
Neste Oyj dropped 19.4% to €19.40 after the Finnish biofuel maker lowered its 2024 margin estimate for renewable energy products.
Vodafone Group increased 3.6% to 76.16 pence after the struggling telecom carrier launched a €500 million stock buyback plan.
Britvic Plc soared 7.7% to 988.0 pence after the British beverage maker said revenue and profit in the first half increased and the company announced a £75 million stock buyback plan.
Hunting plc increased 22% to 454.0 pence on news that the engineering company won a new order worth $145 million from Kuwait Oil Company.
ThyssenKrupp declined 1.9% to €4.83 after the German steelmaker lowered its annual sales and earnings outlook for the second time in three months.
Nikkei In Tokyo Traded Sideways; Sony, Yokohama Rubber, and Nitori In Focus After Earnings Results
Akira Ito
15 May, 2024
Tokyo
Stocks and market indexes in Tokyo edged higher, tracking gains in overnight trading in New York.
Market sentiment was positive in Tokyo despite the hotter-than-expected U.S. producer price inflation in April, suggesting that the Federal Reserve may keep high interest rates for longer.
The Japanese yen dropped by 0.2% to 156.24 against the U.S. dollar after the inflation report highlighted the possibility that a wide interest rate gap between the U.S. and Japan is likely to persist for a long time.
Investors are now looking forward to the release of the consumer price inflation report later in the day, and economists are anticipating the annual inflation rate to hover around 3.2%.
The Nikkei 225 Stock Average increased 0.1% to 38,391.08, and the Topix index edged up 0.1% to 2,732.38.
Sony Group Corp. soared 9.8% to ¥13,035.0 after the company said its quarterly profit advanced following the strong performance in its movie and game business.
Tech stocks traded higher following the gains in overnight trading in New York.
Tokyo Electron, Advantest, Screen Holdings, and Socinext gained between 1% and 3%.
Banks traded mixed, and Mitsubishi UFJ declined 0.5% to ¥1,597.50, while Mizuho Financial and Sumitomo Mitsui edged higher by 0.45.
Isetan Mitsukoshi soared 13% to ¥2,642.0 after the department store operator's operating earnings outlook surpassed market expectations.
The retailer estimated fiscal fourth quarter revenue to increase 12% to 134.67 billion yen and net income to advance 91% to 24.47 billion yen.
A weak yen and a surge in tourism supported the sharp gains in retail store chain sales.
Sales of high-value-added products continued to drive sales, particularly at the Isetan Shinjuku Main Store, Mitsukoshi Nihombashi Main Store, and Mitsukoshi Ginza Store, with year-on-year sales growth of 115.2% for the total of Isetan Mitsukoshi Ltd. and 111.3% for the total of domestic department stores, the company said in a note to investors.
In addition, both main stores and the Mitsukoshi Ginza Store have outperformed fiscal 2018 for ten consecutive months.
Yokohama Rubber advanced 5.2% to ¥4,158.0 after the company reported another record quarterly sales.
Revenue in the March quarter increased 23.5% to 252.4 billion yen, net income advanced 104% to 19.8 billion yen from 9.7 billion yen, and diluted earnings per share rose to 123.15 yen from 60.39 yen.
Nitori Holdings plunged 17% to ¥17,805.0 after the home furnishing retailer reported lower than expected sales in the March quarter.
Revenue in the quarter fell to 232.05 yen compared to expectations of 236.98 billion yen, and net income declined to 18 billion yen, falling short of the expectation of 26.7 billion yen.
For the full-year 2024, sales declined 5.5% to 895.7 billion yen from 948.1 billion yen, net income attributable to shareholders fell 9% to 86.5 billion yen from 95.1 billion yen, and basic earnings per share fell to 765.62 yen from 841.92 yen a year ago.
Shanghai Indexes Trade Down Amid Rising Trade Tensions Between the U.S. and China
Li Chen
15 May, 2024
Hong Kong
Stock market indexes in Shanghai traded down amid rising tensions between China and the U.S.
Markets in Hong Kong are closed to celebrate the birthday of the Buddha.
Chinese authorities said they will take appropriate measures to defend the interests of their corporations after U.S. President Joe Biden approved a sharp increase in tariffs on electric vehicles, solar panels, batteries, and other renewable energy products imported from China.
The overall impact of the tariffs is expected to be minimal, but the worsening of the tone and growing trade uncertainty are likely to force Chinese companies to relocate manufacturing away from China and closer to its major international markets.
The U.S. move is going to alter the global supply chain in several industries as Chinese companies seek to relocate manufacturing to Mexico and Hungary, taking advantage of regional trade zones to access the U.S. and European markets.
The People's Bank of China held its key one-year lending rate at 2.5%, and the central bank launched the sale of 125 billion yuan bonds for financial institutions at the unrevised rate on Wednesday.
Market sentiment has been positive over the last three months after benchmark indexes in Shanghai and Hong Kong rebounded from the lows of February 16.
Last month, China's politburo announced its plans to release market-supportive measures and encouraged state-controlled financial institutions to increase exposure to Chinese stocks.
The announcements supported the three-month rally that lifted the Hang Seng index by more than 20%, but investors have been increasingly doubting the rally's durability after the authorities failed to follow up with specific steps to revive the moribund property market and improve consumer confidence.
Moreover, rising tensions between the U.S. and China also contributed to caution in stock trading this week.
China Stock Movers
The CSI 300 index fell 0.3% to 3,647.19 and the Hang Seng index decreased 0.2% to 19,073.71 in Tuesday's trading.
Electric vehicle makers were in focus amid rising tensions between the U.S. and China.
Dongfeng Motor, BYD, and FAW Jiefang Group declined between 1% and 3%.
Tongwei Co. declined 1.5% to 22.34 yuan in Shanghai trading.
Banks were in focus after the People's Bank of China held its one-year medium-term lending rate at 2.5%.
Bank of China, China Merchants Bank, Agriculture Bank of China, and ICBC gained between 0.1% and 1.3%.
India Movers: Apollo Tyres, Bharti Airtel, Colgate Palmolive, Shree Cements, Siemens
Arun Goswami
15 May, 2024
New York City
Stocks and benchmark indexes in Mumbai opened higher, and investors reviewed the fresh batch of mixed quarterly results.
The Sensex index increased by 0.2% to 73,212.71, and the Nifty index rose by 0.2% to 22,261.70.
On the Mumbai stock exchange, 73 stocks traded at their 52-week highs, and 9 stocks traded at their 52-week lows.
The yield on the 10-year Indian government bonds inched lower to 7.10%, and the Indian rupee edged lower at ₹83.48 against the U.S. dollar.
Apollo Tyres decreased 0.3% to ₹476.30 after the company reported weak quarterly results.
Revenue in the March quarter advanced 0.2% to ₹6,258 crore and net income fell 13.7% to ₹354 crore from a year ago, respectively.
Siemens increased 1.1% to ₹6,690.0 after the electrical equipment maker reported strong quarterly results.
Revenue in the March quarter rose 19% to ₹5,248 crore, and net income soared 74% to ₹896 crore.
New orders in the quarter increased to ₹5,184 crore.
Shree Cements advanced 0.3% to ₹26,072.0 after the company reported a rise in earnings and sales in the March quarter.
Consolidated revenue increased 6% to ₹5,433 crore, and net income advanced 28% to ₹674.9 crore from a year ago, respectively.
Colgate Palmolive declined 1.4% to ₹2,818.0 despite the consumer goods company reporting a strong increase in sales and earnings in the March quarter.
Consolidated sales rose 10.4% to ₹1,480.7 crore, and after-tax income advanced 20.1% to ₹379.8 crore from a year ago, respectively.
Bharti Airtel gained 0.1% to ₹1,287.05 after the wireless telecom network operator reported mixed quarterly results.
Consolidated revenue declined 10.5% to 7,467 crore and net income plunged 31% to 2,071.6 crore from a year ago, respectively.
U.S. Indexes May Have to Adjust to the Growing Possibilities of Higher-for-Longer Inflation
Alexander Garcia
14 May, 2024
Miami
Benchmark indexes on Wall Street meandered after hotter-than-expected producer price inflation raised the prospect of interest rates staying higher for longer.
This week, two inflation reports are expected to garner investors' attention because the updates on price pressure provide key input to policymakers in determining the level of interest rates.
Factory gate prices rose 0.5%, surpassing the 0.3% estimated by the Ticker.com survey.
The higher-than-expected producer price inflation dashed hopes that the Federal Reserve would lower rates toward the end of the year.
Investors shifted their attention to the consumer price inflation report on Wednesday, after the release of the producer price inflation update today.
Investors are anticipating monthly inflation to slow to 0.3% from 0.4% in March and the annual pace to ease to 3.6% from 3.8%, respectively.
Investors also reviewed the latest batch of earnings, including results from Alibaba Group and Home Depot and AMC Entertainment raised $250 million through a secondary offering.
Meme stocks soared after the man behind the "Roaring Kitty" social account, which powered the frenzy to buy stocks that are heavily shorted, posted for the first time in three years.
Producer Prices Advanced in April
Producer price index increased 0.5% in April from the previous month and rose 2.2% from a year ago, the U.S. Bureau of Labor Statistics reported Tuesday.
Goods costs rose 0.4% after falling 0.2% in March, and service prices increased 0.6% from the previous month, following the downwardly revised 0.1% decline in March.
Core producer prices on a monthly basis rose 0.5% and advanced 2.4% on an annual basis from the downwardly revised 2.1% in March.
U.S. Indexes and Treasury Yields
The S&P 500 index increased 0.02% to 5,222.78, and the Nasdaq Composite fell 0.3% to 16,394.49.
The yield on 2-year Treasury notes edged lower to 4.85%, 10-year Treasury notes inched lower to 4.48%, and 30-year Treasury bonds edged lower to 4.63%.
WTI crude oil increased $0.14 to $79.15 a barrel, and natural gas prices decreased 3 cents to $2.34 a thermal unit.
Gold increased by $5.83 to $2,344.07 an ounce, and silver rose 9 cents to $28.36.
The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.21.
U.S. Stock Movers
Home Depot declined 0.9% to $338.0 after the home improvement retailer reported weaker-than-expected results in the first quarter.
Comparable sales in the first quarter declined by 2.8%, and in the U.S. they fell by 3.2% from a year ago.
Revenue in the first quarter ending in April declined 2.3% to $36.4 billion from $37.3 billion, net income dropped 7% to $3.6 billion from $3.87 billion, and diluted earnings per share fell to $3.63 from $3.82 a year ago.
The specialty retailer said fiscal 2024 sales are likely to decrease 1.0%, including the 53rd week, but excluding the recent acquisition of SRS Distribution Inc.
Home Depot anticipated comparable same-store sales to fall 1% for the 52-week period, but 53-week diluted earnings per share to increase 1.0%. The 53rd week is expected to contribute 30 cents of diluted earnings per share.
Games Global Limited said it plans to postpone its initial public offering, citing uncertain market conditions, which was previously scheduled for May 14.
The online casino game supplier was looking to sell 14.5 million shares at a price between $16 and $19 per share.
Shares of AMC and GameStop shot up in early trading following the resumption of social media postings by "Roaring Kitty."
GameStop catapulted 130% to $69.67, and AMC Entertainment Holdings soared 123% to $11.81.
Alibaba Group declined 5% to $80.39 after the China-based online e-commerce platform operator reported higher-than-expected revenue and said net income plunged 86% as the company stepped up investment in artificial intelligence tools.
European Markets Trade Near Record Highs
European markets traded around the flatline, and the euro edged higher in Tuesday's trading.
Benchmark indexes in Paris, London, and Frankfurt edged up, and bond yield advanced amid interest rate uncertainty as investors debated reviewed the latest update on German inflation and UK's labor market update.
German CPI Holds Steady in April
Germany's consumer price inflation was confirmed at 2.2% in April, matching the annual rate in March, and the preliminary report released on April 29 was unrevised, the Federal Statistical Office, or Destatis, reported Tuesday.
Retail inflation dropped to the lowest level since May 2021, while the EU harmonized inflation inched slightly higher to 2.4% from 2.3% in the preliminary estimate.
German Investor Morale Improves to a 26-month High
German investor morale improved and surged to the highest level in May since February 2022, the Centre for European Economic Research reported Tuesday.
The ZEW Indicator of Economic Sentiment increased to 47.1 in May from 42.9 in April, the tenth consecutive month of improving confidence among financial experts, driven in part by the indications of German economic recovery and better-than-expected first-quarter GDP growth.
The British pound held steady after the latest update on the labor market showed improving conditions.
UK Real Wages Advance 10th Consecutive Month
Regular pay in the UK increased 6% from a year ago in the March quarter to £637 per week, the Office for National Statistics reported Tuesday.
Wage gains matched the annual increase in the previous three-month period ending in February and held at the 2022 lows.
Total pay, which includes bonuses, rose 5.7% in the period from a year ago.
The jobless rate edged higher for the third month in a row to 4.3%.
Adjusted for inflation, real total wages increased 1.7%, and real total pay advanced 2.0%.
Europe Indexes and Yields
The DAX index decreased by 0.2% to 18,711.42; the CAC-40 index fell by 0.2% to 8,225.80; and the FTSE 100 index inched higher by 0.2% to 8,428.13.
The yield on 10-year German bonds edged up to 2.51%; French bonds inched higher to 3.02%; the UK gilts edged higher to 4.16%; and Italian bonds inched higher to 3.87%.
The euro edged higher to $1.079; the British pound inched higher to $1.254; and the U.S. dollar edged higher to 90.78 Swiss cents.
Brent crude decreased $1.03 to $82.33 a barrel, and the Dutch TTF natural gas fell by €0.01 to €29.66 per MWh.
Europe Stock Movers
Anglo American declined 2% to 2,650.50 pence after the mining company announced its plans to sell several units as part of a turnaround effort.
Vodafone Group increased 3.4% to 72.42 pence after the international wireless telecom carrier said organic earnings in 2024 rose 2.2%.
Flutter Entertainment declined 2.4% to 15,800 pence after the sports betting and gambling company reported a wider quarterly net loss.
Hannover Re fell 3.4% to €227.20 despite the reinsurance company announcing strong first quarter results and confirming its 2024 outlook.
Delivery Hero SE soared 22% to €30.93 after Uber Technologies agreed to acquire the company's Foodpanda delivery business in Taiwan for $950 million in cash.
Rheinmetall AG decreased 3.2% to €519.20 after the German arms manufacturer missed its sales and earnings estimate in the first quarter.
Veolia Environnement SA gained 3.1% after the French waste and water management company met first quarter core profit expectations.
The company also announced winning a $320 million contract for a desalination plant in the United Arab Emirates.
Earnings and Yen Weakness Dominate Tokyo Market Sentiment
Market indexes in Tokyo edged higher in nervous trading as the yen struggled to hold above the flatline.
The Nikkei 225 and the Topix inched higher in active trading following the lackluster trading in the previous session.
The movement in the yen and the latest batch of earnings dominated market sentiment in Tokyo.
The yen gained 0.45 to 146.58 against the U.S. dollar as traders continued to bet against the yen on the wide gap between the U.S. and Japan bond yields.
Traders in Tokyo are estimating the yen to resume its steady decline after two days of suspected intervention last week that cost the Bank of Japan at least $35 billion.
The trading sentiment in the Japanese yen is driven by the expectations of the U.S. interest rates staying higher for longer and the Bank of Japan in no hurry to lift its policy rate much higher from the current rate near zero.
Japan Stock Movers
The Nikkei 225 Stock Average rose 0.4% to 38,333.17, and the Topix gained 0.2% to 2,729.78.
Tech stocks were in focus following the slight rebound in tech stocks in overnight trading in New York.
Tokyo Electron decreased 0.4%, Advantest rose 2.6%, Screen Holdings dropped 2.6%, and Socionext fell 2.2%.
Sumitomo Mitsui Fudosan, Mitsubishi UFJ, and Mizuho Financial edged up between 0.2% and 0.6%.
Toyota Motor, Honda Motor, and Nissan Motor gained between 0.1% and 1.3%.
Furukawa Electric soared 18.6% to ¥4,092.0 after the company reported financial results that were ahead of market expectations.
Revenue in the fiscal year 2024 ending in March declined 0.9% to 1.056 trillion yen from 1.06 trillion yen, net income attributable to shareholders decreased to 6.5 billion yen from 15.6 billion yen, and earnings per share fell to 92.40 yen from 225.80 yen a year ago.
Obayashi Corp. increased 13.4% to ¥1,901.0 after the construction company reported a strong increase in annual sales.
Revenue in the fiscal year 2024 ending in March rose 17.2% to 2.3 trillion yen, net income attributable to shareholders rose to 75 billion yen, and consolidated orders received 13.1% to 2.5 trillion yen.
China Indexes Hover Near 8-month High
Stocks in Shanghai and Hong Kong lacked direction, and investors awaited the release of earnings from Alibaba Group and Tencent Holdings.
Benchmark indexes in Shanghai have rebounded after Chinese regulators and policymakers announced market-supportive measures and regional governments eased mortgage restrictions for new home buyers.
The Hang Seng index extended 4-week gains to a nine-month high in the hopes that policymakers would follow through with more concrete measures to support the faltering property market in mainland China and that state-controlled financial organizations would step up their buying of domestic stocks.
Yuan Devaluation Worries Keep Traders On Edge
The yuan was also in focus and traded at 7.24 against the U.S. dollar on the growing worries of a string of competitive devaluations sparked by the sharp decline in the Japanese yen.
Moreover, the widening gap between the U.S. and Japan interest rates is weighing on the Japanese yen, and traders are bracing for the yen to drop to as low as 170 against the U.S. dollar.
The persistent decline in the yen is likely to set in motion a chain of events that could force China, Taiwan, and Korea to devalue their currencies.
The Japanese yen has fallen to the lowest level since 1992 against the yuan, trading at a low since 2008 against the Korean won, and the currency is hovering at a 31-year low against the Taiwanese dollar.
The Japanese yen inched 20 cents higher to 156.43 against the U.S. dollar in late Monday's trading in Tokyo.
China Stock Movers
The CSI 300 index decreased 0.3% to 3,654.77, and the Hang Seng index dropped 0.1% to 19,089.83.
ESR Group jumped 24.4% to HK$12.44 after the logistics group received a non-binding offer to go private. Warburg Pincus, the largest investor in the company, is not part of the consortium, but the company welcomed the takeover proposal.
The consortium of private equity groups led by Starwood Capital Partners, Sixth Street, and SSW proposed to take the company private.
The conditional offer was reported by the company in a filing with the exchange but the offer did not disclose the price.
Electric vehicle makers, financial services providers, and Internet-driven companies were in focus in Tuesday's trading.
Tencent Holdings increased 0.9% to HK$381.60, Meituan jumped 0.7% to HK$123.20, Alibaba Group rose 2.2% to HK$82.95, and Baidu advanced 1.1% to HK$108.60.
BYD advanced 0.3% to HK$223.40, Li Auto dropped 1.7% to HK$103.20, and Xpeng added 1.3% to HK$31.15.
Bank of China decreased 0.7% to HK$3.70, China Construction Bank dropped 1.1% to HK$5.57, and ICBC declined 1.1% to HK$4.49.
CATL dropped 0.2% to ¥199.05, and the company is preparing to invest about US$7.9 billion to build its manufacturing plant in Hungary and meet the demands of its customers in the European Union.
Producer Price Inflation Rebounded in April
Brian Turner
14 May, 2024
Washington, D.C.
Producer price index increased 0.5% in April from the previous month and rose 2.2% from a year ago, the U.S. Bureau of Labor Statistics reported Tuesday.
Nearly three quarter of increase in producer price inflation is linked to the increase in final demand for services.
Goods costs rose 0.4% after falling 0.2% in March, and service prices increased 0.6% from the previous month, following the downwardly revised 0.1% decline in March.
The index for final demand less foods, energy, and trade services moved up 0.4% in April after rising 0.2% in March.
For the 12 months ended in April, prices for final demand less foods, energy, and trade services increased 3.1%, the largest advance since climbing 3.4% for the 12 months ended April 2023.