Macro Weekly: Central Bank Enablers

Last year investors writhed in distress when the Fed reduced bond purchases. Central banks have improved the situation, but for how long?

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Morning News Summary

Mixed Bag of Corporate Earnings

The global markets had a mixed day of trading on the back of corporate earnings, merger talks and growth concerns. The US markets moderately rose, while UK, Europe and Asia took a hit to finish in the red.

US stocks close moderately higher but Dow streak ends

US stocks were mostly higher on Thursday as gains in leading tech companies were overshadowed by 3M’s bleak quarterly report. However, Dow bucked the trend to slide. The S&P 500 edged up 0.1%, the Dow Jones Industrial Average fell -0.4% and the Nasdaq Composite rose +0.3%.

Guidance from US companies on the state economy and the business climate was the main driver in the market. 3M was one of the movers, tumbling -12.8%, as the diversified industrial giant slashed its full year 2019 guidance and said it would cut 2,000 jobs. On the other hand tech companies, Facebook (gained +5.8%) and Microsoft rose (+3.3%) after reporting better than expected results. Lam Research jumped +4.9%, as the semiconductor equipment maker reported better than expected quarterly results. Comcast climbed +3.4% and Hershey’s rose +3.9% after reporting earnings that exceeded estimates. Another notable decliner was Xilinix which slumped -16.4%, after the chipmaker’s quarterly gross margins fell short of estimates. Tesla fell -4.3% after producing a wider than expected quarterly loss. United Parcel Service shares slipped -7.3% after the company reported results that disappointed.

European and UK stocks take a hit

European markets slipped on Thursday after negative news, which included growth worries in Germany, investment bank turmoil, as well as the Deutsche Bank and Commerzbank merger breaking down. The Stoxx Europe 600 fell -0.2%. Finnish telecom network Nokia was the biggest drag on the index, falling -9.0%, after reporting a surprise quarterly loss. Merger talks between Deutsche (-0.8%) and Commerzbank (-2.1%) have officially ended. However, losses were tempered by Switzerland’s biggest bank UBS advancing +1.2% after its 1Q results surpassed expectations.

London markets closed in the red after the Sainsbury’s and ASDA merger was declared dead. The UK’s FTSE 100 fell -0.5%. Sainsbury’s tumbled -4.7% after the supermarket chain scrapped its proposed 7.3 billion pound takeover after it was blocked by Britain’s competitor regulator. Taylor Wimpey shed -5.4% leading the index lower on its worst day in more than 5 months, after it warned that full year margins would be slightly lower than last year as it costs more to build a home. Fellow housebuilders Persimmon (-2.7%), Barratt Developments (-2.4%) and Berkeley (-1.6%) slipped as well. Barclays fell -3.6%, joining the procession of global banks reporting that their investment banks were a drag on 1Q earnings.

Asian markets closed in the red

Asian markets fell as concerns over the global economy dampened investor enthusiasm. The Shanghai Composite (-2.4%), Hang Seng (-0.9%) and Kopsi (-0.5%) all suffered sharp drops.

The ASX 200 was closed for ANZAC day.

Crude and iron ore fell, while gold rose

WTI crude fell -0.1% to US$65.76, while gold rose +0.2% to US$1,277.99 and iron ore fell -1.0% to US$93.50/MT.

Today’s events

  • Stats NZ: Overseas merchandise trade - March 2019
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