U.S. and European Markets Turn Lower, Stimulus Hopes Support China Stocks

Barry Adams
09 Jan, 2024
New York City

U.S. stocks trimmed early losses, and investors remained on the sidelines a day after tech stocks powered the market rally.

Benchmark indexes rested in early trading, and mega-cap tech stocks hovered near their recent highs after the S&P 500 index added more than 1.4% and the Nasdaq Composite advanced about 2.2% in the previous session.

Investors shifted their attention to two key inflation measures scheduled to be released later in the week.

The December reading of the consumer price index is scheduled to be released on Thursday, followed by the producer price index on Friday.

Investors are hoping that both measures will show a cooling of inflation on a monthly basis, supporting the case for the Federal Reserve to lower the rate sooner than expected.

 

U.S. Trade Deficit Narrowed in November

The U.S. international trade deficit narrowed to $63.2 billion in November from $64.5 billion in October, the Bureau of Economic Analysis reported Tuesday.

The goods deficit declined $0.6 billion to $89.4 billion, and the service surplus rose $0.7 billion to 26.2 billion.

Total exports decreased by 1.9% to $253.7 billion, and total imports declined by the same amount to $316.9 billion.

Year-to-date, the goods and services deficit decreased $161.8 billion, or 18.4%, from the same period in 2022.

Exports increased $28.8 billion, or 1.0%, and imports decreased $133.0 billion, or 3.6%.

The deficit with China declined by $2.4 billion to $21.5 billion and with the European Union by $3.5 billion to $15.6 billion, but rose by $2.0 billion to $2.3 billion.

 

U.S. Indexes and Yields

The S&P 500 index decreased 0.3% to 4,750.81, and the Nasdaq Composite increased 0.02% to 14,846.78.

The yield on 2-year Treasury notes decreased to 4.38%, 10-year Treasury notes held steady at 4.04%, and 30-year Treasury bonds rose to 4.20%.

WTI crude oil increased $1.28 to $71.98 a barrel, and natural gas prices increased 24 cents to $3.21 a thermal unit.

Gold increased $0.30 to $2,028.18 an ounce, and investors debated the future interest rate path.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 102.37.

 

U.S. Stock Movers

Juniper Networks rose 24% to $37.50 on a report that Hewlett-Packard Enterprise is in "advanced talks" to acquire the company in a $13 billion deal.

The news was first reported by the Wall Street Journal and could not be independently verified.

The acquisition between the two companies could be finalized as early as this week, the Journal reported.

Unity Software increased 2.9% to $39.95 after the company said it plans to lay off about 25%, or 1,800, of its workforce as a part of the company's restructuring plan.

Microchip Technology declined 2.9% to $83.10 after the company lowered its fiscal third quarter revenue outlook, citing a "weakening economic environment."

The company said revenue in the quarter is likely to decline sequentially by 22% compared to the previous estimate released on November 2, 2023, of a decline between 15% and 20%.

Jet Blue Airways fell 5% to $5.47, and the company said President and Chief Operating Officer Joanna Geraghty will replace Chief Executive Robin Hayes effective February 12.

 

Economic Worries Drag European Markets Down

European markets lacked direction in early trading, and investors reviewed the latest economic data from Germany, France, and Italy.

Investor enthusiasm for stocks has been on the decline for the second week in a row amid interest rate and economic uncertainties.

Those market anxieties were heightened after Germany's industrial output shrank for the sixth month in a row.

 

German Industrial Production Declined Sixth Consecutive Month

Industrial production declined 0.7% from the previous month in November following a revised 0.3% fall in October, the Federal Statistics Office, or Destatis, reported Tuesday.

On an annual basis, German industrial output shrank 4.8%, the sharpest fall in nearly three years.

The production of capital goods fell by 0.7%, intermediate goods by 0.5%, and consumer goods by 0.1% from the previous month.

Outside of the manufacturing industry, energy production increased by 3.9% and construction production fell by 2.9% compared to the previous month.

 

France's trade Deficit Shrank In November 

France's international trade deficit decreased in November due to a sharp decline in imports, the customs office reported earlier Tuesday.

The trade deficit narrowed to €5.9 billion in November from €8.5 billion in October, largely because of the decline in the import price of energy.

The trade deficit in the same month last year was €14.4 billion.

Exports declined 0.6% to €49.6 billion, and imports fell 4.8% to €57 billion.

 

UK Retail Sales Growth Slowed in the Fifth Consecutive Month In December

UK comparable retail sales increased 1.9% from a year ago in December, slower than the 2.6% rise in November, the British Retail Consortium reported Tuesday.

Total retail sales rose at a slower pace of 1.7%. as consumers avoided high-priced items and last-minute bargains failed to attract customers to buy furniture and household goods.

“Christmas shoppers ditched clothing, jewelry, and technology gifts, opting for beauty, health, and personal care products, which, along with food and drink, drove festive sales this year," said Paul Martin, head of retail at survey sponsor KPMG.

December's retail sales rose at a slower pace following a 2.6% rise in November amid lackluster Christmas holiday sales.

Retail sales growth slowed for the fifth month in a row after consumers stayed focused on basic items while battling high inflation and the cost-of-living crisis amid an interest rate at a 15-year high of 5.25%.

 

Europe Indexes and Yields

The DAX index decreased 0.2% to 16,688.36, the CAC-40 index fell 0.3% to 7,426.62, and the FTSE 100 index inched lower by 0.1% to 7,683.96.

The yield on 10-year German bonds edged up to 2.18%; French bonds inched higher to 2.72%; the UK gilts edged up to 3.82%; and Italian bonds advanced to 3.88%.

The euro edged lower to $1.093, the British pound inched higher to $1.272, and the U.S. dollar eased to 85.03 Swiss cents.

Brent crude increased $1.42 to $77.60 a barrel, and the Dutch TTF natural gas decreased by €0.94 to €30.64 per MWh.

 

Europe Stock Movers

GSK plc increased 1.1% to 1,565.40 pence after the pharmaceutical company agreed to acquire the biotech company Aiolos Bio for $1.4 billion.

Trigano SA jumped 2.9% to €146.80 after the camping van maker reported higher revenue in the fiscal first quarter.

Revenue in the first quarter increased 19.1% to 931.6 million from 782.3 million a year ago.

Games Workshop Group decreased 1.1% to 9,665.0 pence despite the company reporting strong first-half results.

Hill & Smith fell 1% to 1,808.71 pence, and the maker of sustainable products agreed to acquire Capital Steel Service LLC for $6.25 million.

Munich Re declined 0.5% to €381.20 after the German reinsurance company provided an update on the cost of natural disasters in 2023.

Overall losses from natural disasters in 2023 totaled $250 billion, of which only $95 billion were insured.

Record thunderstorm losses in North America and Europe totaled $76 billion, of which $58 billion were insured.

The number of deaths caused by natural disasters rose to 74,000 in 2023, well above the annual average of the last five years of 10,000.

In contrast, economic losses from natural disasters were dominated by severe storms. 76% of overall losses were weather-related, while 24% had geophysical causes, the report from Munich Re noted.

 

 

Asian Markets Advance, Stimulus Hopes lift China Stocks

Asian markets generally traded higher following the advance in New York and reversal in trading across Europe.

The Nikkei index gained 1.2% to 33,789.56 after tech stocks gained, reflecting the surge in tech stocks in New York. Markets in Japan were closed on Monday and gained sharply in early trading.

The index earlier touched a 33-year high after exporters, retailers, and tech stocks were among the leading gainers.

Advantest Corp. gained 4%, Tokyo Electron added 3.3%, and Screen Holdings increased 1.6%.

The average household spending in Japan in November declined 2.9% to 286,992 yen, the Ministry of Internal Affairs and Communications reported Tuesday.

The average monthly household income decreased by 4.7% to 494,181 yen.

The Kospi index in Seoul jumped as much as 0.7% in early trading but lost momentum in late afternoon and fell 0.3% to 2,556.90.

The Bank of Korea is set to announce its rate decision on Thursday, and economists are anticipating the central bank to hold its key lending rate of 3.5% for the ninth time in a row.

Stocks in Hong Kong advanced 0.3% to 16,277.09, and the Shanghai Composite Index gained -.2% to 2,894.28 after Beijing hinted at stimulus measures to support the faltering economic growth.

The People's Bank of China is likely to lower the reserve ratio for banks, cut the medium-term lending rate next week, and open market operations, according to comments from Zou Lan, director of monetary policy at the central bank, reported by state-run Xinhua News Agency.