Global Markets: U.S Markets Advanced, Europe On Hold, Japan and India Indexes Hovered Near Record Highs

Barry Adams
13 Sep, 2023
New York City

Market indexes on Wall Street traded higher after investors reviewed the latest inflation report. 

Investors overlooked mixed signals from the August month inflation report after price rose at a faster pace month because of a surge in gasoline prices but prices for other products and services rose at a slower pace. 

Attention on Wall Street now shifted to the wholesale inflation report Thursday and and retail sales data on Friday. 

Housing stocks were in focus after weekly mortgage activities indicated weakening demand for mortgage refinancing and elevated mortgage rates put buyers and sellers on hold.  

European markets were in holding pattern ahead of rate decisions on Thursday and markets in Japan and India advanced but in China remained under pressure for the second week in a row. 

 

August CPI Report Sends Mixed Signals 

Overall inflation accelerated for the second month in August to 3.7% from 3.2% in July, the U.S. Bureau of Labor Statistics reported Wednesday. 

The inflation picked up following the increase in oil prices in the last two months and weaker comparison from the previous year and cost of transportation services picked up in the month. 

Core inflation, which excludes energy and food, slowed for the fifth month in a row to 4.3% from a year ago and rose 0.3% from the previous month. 

The inflation data measured by the government understates the price increases faced my most urban families with children. The government data vastly understates housing price inflation and cost of shelter in most urban cities across the nation.  

Overall inflation faced my most families, when including home price inflation, could run into upper double digits. 

The yield on U.S. Treasury bonds and notes were nearly unchanged after the release of consumer price inflation data and focus shifted to wholesale price inflation data scheduled to be released on Thursday. 

Despite multiple interest rate hikes over the last sixteen months, inflation has cooled largely because of base effect and rate of price increases has stayed above the Fed's preferred target range of 2%. 

 

Mortgage Applications Drop to 25-year Low 

Mortgage applications decreased 0.8% in the week ending September 8, 2023, following a 2.9% drop in the previous week, and reaching a new low since December 1996, the Mortgage Bankers Association data showed. 

Mortgage refinance applications decreased 5.4% while for a new home purchase rose 1.3%. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less edged up 6 basis points to 7.27%, the level not seen since December 2000.

"Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate,” said Joel Kan, MBA's Vice President and Deputy Chief Economist. 

 

U.S. Indexes & Yields 

The S&P 500 index inched up 0.2% to 4,472.03 and the Nasdaq Composite added 0.3% to 13,809.52.

The yield on 2-year Treasury notes hovered near 5.01%, 10-year Treasury notes inched slightly higher to 4.28% and 30-year Treasury bonds edged down to 4.37%. 

Crude oil increased $0.29 to $89.12 a barrel and natural gas prices increased 0.05 cent to $2.69 a thermal unit. 

The dollar index edged lower to  104.62 mark and hovered near the 105 mark reached last week but higher than the low of 99.85 on July 13. 

Last week, the dollar index, which tracks the price of the U.S. dollar against major currencies, halted a five-day rally Friday but extended gains to the eight week in a row and rose to a six-month high on the expectations of higher interest rates. 

 

U.S. Stock Movers 

American Airlines Group Inc declined 4.5% to $13.42 after the international carrier said higher crude oil prices are expected to hurt quarterly profit. 

The airline estimated third quarter adjusted earnings per share between 20 cents and 30 cents, citing higher fuel prices and a new compensation terms with pilot unions. 

Spirit Airlines Inc dropped 3.3% to $16.70 after the discount carrier lowered its third quarter revenue estimate and operating margin of as much as -15.5% from the previous estimate of between -5.5% and  -7.5%. 

Moderna Inc increased 5.1% to $110.82 after the Center for Disease Control and Prevention recommended new Covid 19 vaccine for all Americans older than 6 months and older.  

 

European Markets Hold Ahead of Rate Decisions 

Stock markets in Europe traded down after weak regional economic data added to investor anxieties ahead of interest rate decisions on Thursday. 

Popular indexes in Frankfurt, London and Paris eased lower and the euro dropped to a three-month low ahead of the widely anticipated 25 basis points rate hike by the European Central Bank. 

 

Euro Area Industrial Production Declined In July 

Industrial output in the Euro Are declined 1.1% from the previous month in July, Eurostat reported Wednesday. 

The weakness in durable goods production overshadowed the increase in energy production and the rebound in intermediate goods and non-durable goods output. 

Industrial production declined 2.2% in July, and fell for the fifth month in a row and fell six months in the last nine months.  

 

UK GDP Shrank In July 

The U.K. economy shrank at the fastest pace in seven months in July, the Office for National Statistics reported Wednesday. 

Weakness in the service sector of 0.5% was the main contributor to the decline in overall activities, driving the weakness in healthcare and computer programming related activities. 

GDP decreased 0.5% from the previous month reversing the gain of 0.5% in June.

For the three months to July, GDP expanded 0.2%.  

 

Europe Indexes & Yields

The DAX index decreased 0.5% to 15,663.17, the CAC-40 index eased 0.1% to 7,269.66 and the FTSE 100 index inched down 0.02% to 7,525.99.

The yield on 10-year German bonds increased to 2.68%, French bonds traded higher to 3.22%, the UK gilts edged up to 4.41% and Italian bonds rose to 4.47%.

The euro edged lower to a three-month low to $1.071, the British pound to $1.243 and the U.S. dollar fetched 89.25 Swiss cents.

Brent crude decreased $0.24 to $92.36 a barrel and the Dutch TTF natural gas decreased €2.48 to €37.18 per MWh.

 

Europe Stock Movers

Inditex SA decreased 2.4% to €35.05 despite the parent of Zara reporting a 40% jump in profit in the first-half. 

BP Plc decreased 1.2% to 516.30 pence and chief executive Bernard Looney resigned over personal relationships with colleagues. 

Renault SA advanced 1.9% to €37.43 and the European Commission launched an investigation into subsidies received by electric vehicle makers in China. 

Europe is "Open to competition but not for a race to the bottom," said European Commission President Ursula von der Leyen. 

Hunting Plc jumped 4.4% to 270.50 pence after the engineering company reiterated its fiscal 2023 and 2024 outlook and forecasted growth for the rest of the decade. 

Aviva Plc rose 2.9% to 387.20 pence after the British insurance company said it plans to exit from its Singlife joint venture. 

Aviva plans to sell its 25.9% stake in Singapore Life Holdings and two debt securities to Japan based Sumitomo Life for £800 million.  

 

Nikkei Extended 4-day Rally, China Indexes Struggled 

Stocks in Asia traded mixed after the benchmark index in Tokyo advanced nearly 1% and in India traded hear record highs. 

The Nikkei index in Tokyo advanced as investors piled into banks on the hopes that the Bank of Japan will soon shift its yield curve management and close yield gap with other advanced economies. 

In Tuesday's trading. the yield on 20-year and 30-year Japanese Government Bonds rose as high as 1.47% and 1.725% respectively, highs not seen in nine years. 

The yield on newly issued 10-year Japanese Government Bond rose to 0.72%, a level not seen since 2014 after the Bank of Japan Governor signaled tolerance for higher rates last week. 

In economic news, Japan's producer price index, a measure of wholesale price inflation, declined for the eighth month in a row. 

Producer price index in Japan rose 3.2% from a year ago in August, slowing from a downwardly revised 3.4% increase in July and dropping to the lowest level since March 2021.

Market indexes in China lacked direction after indexes declined for five days in a row in Hong Kong.

The Hang Seng index traded as high as 1% in earlier trading before reversing the direction on the hopes that the recent restriction of new public offering by the Chinese regulators  may lift market indexes higher. 

The number of new listings in September have fallen to 8 from 37 in July and 33 in June, according to data available from Post, Bloomberg and KPMG. 

The new issue market in A-shares on Chinese exchanges raised about 30% less in the first half compared to last year, despite more companies completing public offering. 

 

Asia Market Indexes 

In Wednesday's trading, the Nikkei index increased 0.95% to 32,776.37, the Shanghai SSE Composite index jumped 0.2% to 3,137.06, the Hang Seng index declined 0.2% to 17,992.98 and the KOSPI index decreased 0.8% to 2,536.58

Stocks in Mumbai lacked direction and popular market indexes hovered near record highs. 

Consumer price inflation in August eased to 6.83% in August from 7.44% in July, the MOSPI reported Wednesday. 

The Sensex index decreased 18.16 points to 67,202.98 and the Nifty index fell 9.40 points to 19,986.30. 

On the Mumbai stock exchange, 83 stocks traded at their 52-week highs and 14 traded at their 52-week lows. 

In August, the Nikkei index fell 0.6%, the SSE Composite index declined 5.2%, the Hang Seng index fell 8.2% and the KOSPI index decreased 4.2%.