The S&P 500 sees first drop in four sessions


Mixed messages from the White House and delayed meetings signal trade talks are stumbling
Newsfeed12 Nov 2019
Photo credit: AFP Photo


Market news selected by the DBS Chief Investment Office


US

US stocks fell amid concern that the US and China are struggling to get an initial trade deal done. The dollar declined.

The S&P 500 Index dropped for first time in four sessions in trading nearly 20% below its average of the last 100 days. The benchmark closed 0.20% lower at 3,087.01 on Monday (11 November). US President Donald Trump’s tariff comments over the weekend sparked the decline after trade optimism sent stocks to multiple records last week (ended 8 November).

In company news, Qualcomm Inc slid after a downgrade, while Walgreens Boots Alliance Inc surged following a Bloomberg News report that said investment firm KKR & Co Inc formally approached the company about a deal to take it private. The Boeing Company jumped after saying it may resume 737 Max deliveries next month, which helped erase losses on the Dow Jones Industrial Average. The Dow inched 0.04% higher to 27,691.49.

Investors are on watch for any headlines that could point to a first-phase trade deal between the US and China after mixed messages from the White House and delayed meetings have heightened concerns that negotiations are stumbling. At the same time, data showed Chinese factory gate prices dropping for a fourth month, increasing worries about the effect of the trade war on the world’s second-biggest economy. – Bloomberg News.

The Nasdaq Composite Index slipped 0.13% to 8,464.28.


EUROPE

German Chancellor Angela Merkel signalled support for her deputy’s gambit to break a years-long impasse over Europe’s banking integration.

Her remarks Monday (11 November) evening suggest that the proposal by Germany’s finance minister, while not officially endorsed by the government, reflects a willingness to negotiate on establishing European Union-wide bank deposit insurance. This was a key pillar of Europe’s strategy to exit the sovereign debt crisis, but years of debate have so far failed to produce results.

“Finance Minister Olaf Scholz has made a serve here, as one says,” Merkel said in Rome at a news conference with Italian Prime Minister Giuseppe Conte. “We will still discuss the details within the German government, but all in all the things are going in the direction that we need. Namely, that we have to get ahead.”

Europe’s seven-year push to cut the link between banks and their home countries has pitted fiscally conservative northern European countries against their neighbours in the south, and smaller Euro Area countries against bigger ones. Germany so far has opposed a joint European guarantee for bank deposits, saying that banks in weaker countries first had to reduce risks on their balance sheets.

While reaffirming that a common deposit insurance would be “a huge proof of trust” and that progress will only be gradual, Merkel said that Germany is committed to reaching this goal.

Italy’s initial reaction to Scholz’s proposal had been cold, with Finance Minister Roberto Gualtieri flatly rejecting a key element of the proposal. Speaking in Brussels last Thursday, Gualtieri had reaffirmed Italy’s opposition to imposing stricter rules on banks’ holdings of domestic sovereign debt. Italy, with the Euro Area’s largest debt, maintains that any move in this direction would gravely endanger its financial system.

On Monday, Merkel reaffirmed Germany’s line on sovereign debt but praised Italy’s progress in strengthening its banks. Speaking alongside Merkel, Conte skirted the details of the debate but restated Italy’s goal of strengthening the setup of the Euro Area.

“We do not fear any instability” in our financial system, he said. “We believe that this discussion should proceed in a balanced way.” – Bloomberg News.

The Stoxx Europe 600 Index fell 0.02% to 405.34 on Monday.

 

JAPAN

Japan is pursuing a JPY300b (USD2.75b) project to transform disaster-struck Fukushima prefecture into a clean energy hub, with the development’s first solar farm scheduled to start in January.

Building wind and solar farms on agricultural land tainted by radiation from the 2011 Dai-Ichi plant meltdown will help rejuvenate the area, which also suffered earthquake and tsunami damage, Masashi Takeuchi, the head of the energy division at the Fukushima prefectural government, said Monday (11 November).

The venture includes plans for 11 solar farms and 10 wind farms with total capacity of 600 megawatts and is scheduled for completion by March 2024. The government plans to contribute JPY30b of subsidies and the Nikkei reported earlier the Development Bank of Japan and Mizuho Bank are among the institutions planning to provide financing.

The first solar farm will probably be a 20-megawatt project in Minamisoma city in the northern part of Fukushima prefecture, according to Takeuchi. Fukushima, which provided nuclear power to Tokyo prior to the disaster, is transforming its energy policy as Tokyo Electric Power Company Holdings Inc (TEPCO) scraps reactors amid public concern about their safety. – Bloomberg News.

The Nikkei 225 Index fell 0.03% to 23,325.71 on Tuesday (12 November) morning. The benchmark declined 0.26% to 23,331.84 the previous session.


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