Weekly market overview - 23rd November 2018

United States

• US stock prices fell last week on rising concerns about the outlook for the U.S. and global economies, with tech shares battered by worries about smartphone demand. Declining oil prices also hit energy shares in the Thanksgiving holiday shortened week. The Dow Jones Industrial Average fell 0.73% on Friday and 3.97% on the week to close at 24,285.95. The Standard & Poor’s 500 index fell 0.66% on Friday and 3.58% on the week to 2,632.56 while the Nasdaq dropped 0.48% on Friday and 4.41% for the week to 6,938.98.

• The yield on benchmark 10-year Treasuries fell to 3.0390% on Friday from 3.0628% at the end of the previous week as the turbulence in the stock market caused some investors to seek the safe haven of bonds.

• Top trade officials of the U.S. and China will meet in Buenos Aires, Argentina ahead of the planned meeting between US President Donald Trump and Chinese President Xi Jinping there on December 1. In the dinner Trump and Xi are each likely to have six aides. Controversial White House trade hawk Peter Navarro will not be one of them, the South China Morning Post reported. The US Trade Representative released a report charging that China had not changed its practice of stealing US technology. Analysts do not expect the Trump to Xi to reach a comprehensive trade agreement but might be able to make enough progress that the US puts on hold the tariff rate hike to 25% from 10% on $200 billion in Chinese imports scheduled for January 1.

• Shares in Apple dropped sharply after a report that it had cut back production of its three newest iPhone models due to weak demand. The stock fell back in bear territory on Tuesday, having fallen 20% from its recent peak. Goldman Sachs cut its price target for the stock on Tuesday for the third time this month, due to weakening demand for iPhones in China.


United Kingdom

• The FTSE 100 fell 0.11% on Friday and 0.87% for the week to close the trading period at 6,952.86, as worries about global growth weighed on investors.

• The UK and European Union reached tentative agreement on a political declaration setting out the intent both parties to negotiate a comprehensive arrangement for their relationship after Brexit. The negotiations are expected to take years. EU leaders were set to meet Sunday to approve the political declaration. UK Prime Minister Theresa May is appealing to business and the public to support the deal, after conservative members of her party rejected it. The government hopes to bring the agreement to a vote in Parliament next month

• The yield on 10-year Gilts fell to 1.3810% at the end of last week from 1.4120% the week before as worries about falling stocks and weaker growth caused a flight to the safety.

• UK manufacturing orders recovered in November, coming in at +10, after falling to -6 in October according to the latest quarterly CBI Industrial Trends Survey

• Standard Chartered, the emerging markets bank, is planning to unveil a share buyback for the first time since 2002 to try to boost the bank’s share price, the Financial Times reported. The size of the buyback plan will depend on the size of the fine that the US Department of Justice will levy against the bank for violating Iran sanctions. Analysts believe the bank will still be able to afford a 1-billion-pound scheme.

• Shares in Centrica, the owner of British Gas, fell sharply Thursday to the lowest level in six months after it reported that it had lost 372,000 home energy customers in the four months to the end of October due to increased competition.

 

Europe (ex. UK)

• On the continent, the Eurofirst 300 rose 0.33% on Friday but still fell 1.11% on the week to close at 1,409.22, as concerns on the slowing economy weighed on the market.

• The yield on benchmark 10-year Bunds fell to 0.3400% last Friday from 0.3670% the previous week on renewed worries about the Eurozone economic outlook on weaker business sentiment data.

• The Euro Area composite PMI dropped to 52.4 in November after October saw a 1-point fall to 53.1. This was not the outcome markets were looking for, with the median forecast at 53.0.

• Major e-commerce platforms have pulled products from Dolce & Gabbana after the Italian luxury brand was accused of racism in its latest advertising campaign in China. The fallout from the ad was compounded by explicit racist messages posted on the official Dolce & Gabbana Instagram account as well of that of co-founder Stefano Gabbana. The company apologized and claimed that its Instagram account had been hacked. The company was forced to cancel a high-profile fashion show in Shanghai after models and celebrities threatened to boycott the event.

• German automaker BMW received a license to provide ride-hailing services in Chengdu, the capital of China’s Sichuan province. BMW Mobility Services will compete with Didi Chuxing, which now controls 90% of the market after buying out Uber in 2016
• The Trump administration has invited the heads of Volkswagen, BMW and Daimler to the White House to talk about auto tariffs, Handelsblatt reported Wednesday. The meeting could take place as early as this week. The automakers did not comment on the report.


Japan

• Japan's Nikkei 225 Index rose 0.65% on Friday but fell 0.72% for the week to 21,646.55 on worries about growth and trade tensions.

• The yield on 10-year Japanese Government Bonds fell over the past week to 0.100% from 0.1040% the previous week on worries about the economic outlook and U.S.-China trade dispute.

• Nissan removed Carlos Ghosn as its chairman, after an internal investigation found he underreported his salary and was guilty of other “misconduct.” Ghosn created the partnership between Nissan, Renault and Mitsubishi and had hoped to merge Nissan and Renault. It is unclear how the companies will replace Ghosn, one of the most powerful auto industry executives. Shares in both Nissan and Renault fell sharply on the news. S&P threatened to downgrade Nissan’s rating because of the scandal.

• The Bank of Japan bank's 2% price stability target will not be achieved in fiscal 2020, which ends March 31, 2021, Governor Haruhiko Kuroda told a parliamentary committee Tuesday. Kuroda told lawmakers that the rise in inflation rate is being impeded by structural factors and "the possibility is small that the 2% price target will be achieved in fiscal 2020." However, Kuroda said that Japan's inflation rate is expected to rise toward the 2% price target on the back of a continued economic recovery and as structural factors gradually disappear.

Asia-Pacific (ex Japan)

• Mainland China China's Shanghai Composite fell 2.49% on Friday, pushing the index down 3.72% for the week to 2,579.48. The attack on the Chinese consulate in Karachi and news that the U.S. was discouraging allies from purchasing telecom equipment from Chinese producers depressed the market.

• Hong Kong's Hang Seng index fell 0.35% on Friday and 0.98% for the week at 25,927.68, on worries about the effects of slowing growth, particularly on property developers.

• Singapore Straits Times Index gained 0.37% on Friday, but the index still fell 1.01% to close at 3,052.49, on worries about the economic outlook.

Emerging Markets

• Brazil's Bovispa headed into the weekend with a drop of 1.42% in Friday trading, resulting in a 2.58% decline for the week, with the index closing at 86,230.23, as the real fell to its lowest level in a week.

• Russia's RSTI fell 2.18% on Friday, pulling the index down 1.81% on the week to close at 1,113.52, as oil prices, Russia’s largest export, posted their largest decline on Friday in three years.

• Mexico's IPC fell 0.31% on Friday and 2.78% on the week, with the index finishing at 41,144.33 as mining stocks fell after a bill was introduced in the legislature that would require the consent of indigenous tribes before mining rights could be granted.

Commodities

• U.S. oil prices posted their biggest decline on Friday in three years, down 7.7% on the day to $50.42. Oil futures fell for the seventh week in a row last week, as supply continued to climb even as OPEC members talked about cutting output. January West Texas Intermediate crude ended down 10.6% for the week.

• Gold futures fell Friday, dropping back from Wednesday’s pre-Thanksgiving two-week high. December gold futures were down 0.4% on the day but rose less than 1% on the week to close at $1.223.20 per troy ounce, with the market focused on the Federal Reserve’s rate path, the outlook for the dollar, and the outcome of the Trump-Xi summit on Dec. 1.

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