Europeans’ trust in EU hits 5-year high
Citizens’ positive perception of the European Union increased strongly, to a five-year high, a new Eurobarometer survey shows. According to the press release, “these are the best results since the June 2014 Eurobarometer survey conducted before the Juncker Commission took office.” Notably, trust in the EU remains higher than trust in national governments or parliaments. Trust in the EU has increased in 20 member states, with the highest scores in Lithuania (72%), Denmark (68%) and Estonia (60%). Support for the economic and monetary union and for the euro reaches a new record high,with more than three-quarters of respondents in the Euro area in favor of the EU’s single currency. In the EU as a whole, support for the euro is stable at 62%. Immigration remains the main concern at EU level, with 34% of mentions, despite a strong decrease from three to four years ago. Climate change, which was ranked fifth in autumn 2018, is now the second most important concern. The Standard Eurobarometer survey took place between June 7 and July 1, 2019 across the 28 EU member states and in the candidate countries, with 27,464 interviews conducted in the member states.
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Initial US jobless claims drop marginally
The number of Americans who applied for unemployment benefits for the first time declined by 8,000 to 209,000 last week, the US Department of Labor said in a report. Meanwhile, analysts on average forecast 215,000. As experts pointed out, initial jobless claims have been at a very low level over the past two years, showing the US labor market continues to strengthen despite a global economic slowdown and the trade war with China. The fourweek average, a less volatile indicator, rose from 212,000 a week earlier to 212,250. Americans who are still paid unemployment benefits for the week ending July 27 decreased by 15,000 to 1,684,000.
China inflation picks up in July
Chinese consumer prices grew 2.8% y-o-y, National Bureau of Statistic of China data show. The annual pace of inflation accelerated compared with 2.7% y-o-y in June and reached the highest level in 17 months. Faster price growth was driven by a sharp increase in food prices (up 9.1% y-o-y, the highest pace since January 2012) after rising 8.3 months earlier. Pork prices jumped 18.2% after an outbreak of the African swine fever in the country, and fruit prices climbed 39.1% due to dry weather. China’s PPI fell 0.3% y-o-y, the statistical authority reported. The reading declined for the first time since August 2016 and was driven by weak internal and external demand, a decline in prices for crude, iron ore and other commodities.
US: bulls gain the upper hand
Key US equity benchmarks closed in positive territory on Thursday, August 8, with support coming from favorable Chinese macro data and abating worries that Beijing will use the yuan as a weapon in the USChina trade war. It should be noted that the Chinese regulator set the yuan’s exchange rate at the lowest mark since 2008 but it turned out to be higher than expected.
Yesterday’s US macro showed initial jobless claims at 209,000 last week, while analysts forecast 215,000.
The external news flow for US trading was favorable as both Asian and European stocks gained. Even Trump’s fresh remarks about the Fed did not put any pressure on the benchmarks. The US leader claimed that he is not happy about dollar appreciation and called on the Federal Reserve to continue rate cuts in order to weaken the greenback.
Recapping the indices, the Dow Jones Industrial Average added 1.43% to 26,378.19, the S&P 500 jumped 1.88% to 2,938.09, and the Nasdaq surged 2.24% to 8,039.16.
In commodities, September NYMEX WTI traded up 2.8% to USD 52.54/bbl, while December COMEX gold retreated 0.7% to USD 1,509.50/oz. The 10-year US government bond yield stood at 1.72%.
Among the advancers, US media conglomerate Viacom added 3.74% to its market cap on upbeat financial results. Ormat Technologies, a supplier of geothermal and renewable energy solutions, soared 10.1% on the back of strong financials.
Taxi services provider Lyft spiked 3%, although net loss in the past quarter increased substantially. It should be noted that revenue climbed 72% y-o-y and the company raised FY guidance.
Among the underperformers, food giant Kraft Heinz tanked 8.6% after reporting lower profit in the first half of 2019. According to the financial statement, net income for six months ending June 29 totaled USD 854 mn, or 70 cents per share, compared with USD 1.76 bn, or USD 1.43 per share, a year ago.
The daily chart shows that the S&P 500 has returned to the area of Bollinger Bands after having repeatedly broken out of their lower line, while the Slow Stochastic Oscillator has just exited oversold territory. As a result, the index holds short-term upside potential.
Europe: benchmarks rise on Chinese macro
Key European stock indices turned in positive performance on Thursday, August 8 on the back of strong Chinese trade surplus data for June. Moreover, markets drew support from stabilization of government bond yields in several European countries.
As regards other macro data, Spain’s adjusted industrial output increased 1.8% y-o-y in June, beating 0.8% y-o-y expected by a wide margin. Greece’s CPI stood at -1.5% y-o-y in July compared to -0.3% y-o-y a month earlier.
Recapping the benchmarks, the UK’s FTSE 100 picked up 1.21%, the French CAC 40 advanced 2.31%, and the German DAX rose 1.68%. The regional barometer Stoxx Europe 600 closed 1.66% higher at 374.71.
Swiss mining company Glencore slipped 0.9% after reporting a 32% decline in half-year profit.
In the Italian banking sector, UniCredit added 1.43% despite trimming full-year revenue guidance, while Banco BPM climbed 2.03% after reporting an upsurge in quarterly profit.
Sports clothing maker Adidas shed 1.6% after posting worse-than-expected quarterly revenue.
Deutsche Telekom gave up 0.53% although quarterly profit rose 7.1%.
Danish brewer Carlsberg soared 11% after improving full-year earnings guidance.
German industrial conglomerate ThyssenKrupp surged 4.33% despite weak earnings for the last quarter.
Coca-Cola HBC slipped 3.6% after reporting a 4.9% decrease in operating profit to EUR 288.9 mn.
Key European stock indices have been mostly on a downward trajectory during the first half of Friday, August 9, as investors take profit on long positions.
As regards key macro data, the UK’s industrial output unexpectedly dropped 0.1% m-o-m in June, while analysts, on average, projected a 0.2% m-o-m increase. In y-o-y terms, the indicator was down 0.6% vs. -0.2% expected. Furthermore, the country’s trade deficit came in at GBP 7.009 bn in June compared to the GBP 11.8 bn consensus forecast. Notably, the trade deficit for May was revised downward to GBP 10.7 bn from GBP 11.52 bn. Furthermore, the country’s Q2 GDP (preliminary) clocked in at -0.2% q-o-q, while analysts, on average, expected a flat q-o-q reading. In y-o-y terms, growth stood at +1.2% vs. +1.4% anticipated.
In Germany, the trade surplus reached EUR 18.1 bn in June compared to the EUR 18.6 bn median consensus.
By 08:32 GMT, the UK’s FTSE 100 slipped 0.26%, the German DAX dropped 0.52%, and the French CAC 40 retreated 0.70%. The regional indicator STXE 600 was off 0.34% at 373.32.
From a technical standpoint, the daily chart shows that the German DAX is attempting to close a bearish gap in the vicinity of 11,900, while the Slow Stochastic Oscillator is on the buy-side, hovering in oversold territory. As a result, the current corrective rebound will likely gain traction in the short term.
Asia: equities broadly rise with China underperforming
Asian stock indices mostly traded higher on Friday, August 9, tracking an earlier positive close in US equities and upbeat macro data out of Japan. Specifically, the country’s Q2 GDP expanded 0.4% q-o-q, beating 0.1% q-o-q projected, while, in y-o-y terms, the indicator rose 1.8% vs. the 0.4% consensus forecast.
In China, the July CPI picked up 0.4% m-o-m, outpacing 0.1% m-o-m expected, and 2.8% y-o-y vs. the 2.7% y-o-y median consensus. The country’s PPI for the same month decreased 0.3% y-o-y, while analysts, on average, anticipated -0.1% y-o-y. This is the first decline since 2016.
In other news, Reserve Bank of Australia governor Philip Lowe said today that the regulator does not need to adjust monetary policy settings immediately.
The Japanese Nikkei 225 added 0.44%, the Chinese Shanghai Composite slipped 0.71%, Hong Kong’s Hang Seng eased 0.69%, the South Korean KOSPI rose 1.11%, and the Australian S&P/ASX 200 closed 0.25% higher.
On the S&P/ASX 200, James Hardie Industries and AMP Limited outperformed the broader market, spiking 14.04% and 11.56%, respectively. On the other side of the spectrum, Mirvac Group and Resolute Mining plunged 3.23% and 3.15%.
The Nikkei 225 gainers were led by Shiseido and Toray Industries, which soared 8.13% and 6.10%, respectively. Among the laggards, Shinsei Bank and Taiheiyo Cement retreated 12.02% and 9.64%.
Oil company Inpex added 2.6% after reporting a 40% upsurge in quarterly operating profit.
Shiseido jumped 8.13% after reporting an increase in quarterly revenue, citing strong demand in China.
Shinsei Bank tanked 12% on news that private fund JC Flowers & Co decided to sell its USD 700 mn equity stake in the lender.
Fuji Film Holdings gave up 6% after posting a 48% decline in quarterly profit.
In the Australian banking sector, Westpac, Australia & New Zealand Banking, Commonwealth Bank and National Bank of Australia ended in the green.
From a technical standpoint, the Hang Seng is consolidating near the 26,000 mark, with the corrective rebound highly likely to extend towards 27,000.
Oil prices have increased moderately on Friday but are set to close the week deep in the red. Since Monday, Brent has declined by 7.1%, while WTI is down 5.5%. Crude has recently been depressed by higher worries that the US-China trade conflict will not be settled in the foreseeable future and it will continue to exert an adverse impact on global economic growth and, as a consequence, oil demand. In addition, the oil bulls were not impressed by Wednesday’s EIA petroleum status report which showed a sharp build in inventories, and further output growth. At the end of the week, some support came from media reports that Saudi Arabia has been discussing with other oil producers possible measures to support oil prices.
Meanwhile, Russell Hardy, CEO of the world’s largest independent oil trading company, claimed that global oil demand growth will slow down this year and will not exceed 650,000 bpd. His company has been revising down its demand forecast all the time, he noted. The International Energy Agency (IEA), in turn, expects crude consumption to rise by 1.2 mn bpd this year, whereas Wall Street is less optimistic. Specifically, J.P. Morgan Chase forecasts demand to grow by 800,000 bpd, or the lowest annual increase since 2011.
Non-ferrous metals have largely dropped on the LME, while gold continues to hover around USD 1,510/oz.
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