Stocks decline on Brexit vote


S&P 500 erases gains as a slide in Technology outweighed a rally in Energy
Newsfeed23 Oct 2019
Photo credit: AFP Photo


Market news selected by the DBS Chief Investment Office


US

Stocks fell as uncertainty over Brexit sank the pound after UK Prime Minister Boris Johnson lost a key vote to fast-track legislation. Traders also parsed a flurry of corporate earnings.

The S&P 500 Index erased gains as a slide in Technology shares outweighed a rally in Energy companies. A selloff in Facebook Inc and Netflix Inc helped push the Nasdaq 100 Index down. The Boeing Company climbed on the eve of its results, despite a cut in outlook by S&P Global Ratings. Treasuries and the US dollar rose.

In a very volatile session, the pound slid as Johnson’s mission to take the UK out of the European Union (EU) in nine days’ time was thrown off course. Members of Parliament blocked his plan to rush the Brexit deal into law. Sterling could “see a 2% or so selloff in a longer delay scenario,” said a currency strategist in New York.

It is a huge week for earnings, with around one-fifth of S&P 500 members due to report their results. So far, the numbers have generally surprised to the upside, reassuring investors that companies are weathering slowing growth and the trade war. All the same, analysts are cutting estimates for next year as the dispute between the world’s biggest economies continues to take a toll.

Netflix sank as Verizon Communications Inc announced a partnership with The Walt Disney Company Facebook’s antitrust woes widened as dozens more states joined New York’s probe into whether its business practices have stifled competition or put users at risk. Biogen Inc surged on news it will ask US regulators to approve an experimental Alzheimer’s therapy. Lyft Inc jumped after executives said the company would turn a profit by the end of 2021. – Bloomberg News.

The S&P 500 tumbled 0.36% to 2,995.99 on Tuesday (22 October). The Dow Jones Industrial Average lost 0.15% to 26,788.10 and the Nasdaq Composite traded 0.72% lower to 8,104.29.

 

EUROPE

European Central Bank (ECB) President Mario Draghi’s appeal to governments to spend more to support the economy appears to be falling on deaf ears.

The fiscal boost from extra spending will be about 0.4% of Euro Area economic output next year, according to an analysis of proposed budgets. That is less than half the budget boost needed to bring growth close to its potential, said a senior economist.

While there could be a bit more fiscal slippage, it still will not be enough. High debt countries like France, Italy, and Spain do not have much room to spend and Germany looks reluctant to embark on a major fiscal expansion.

The ECB has faced some pushback against its call on countries like Germany to loosen the purse strings. Draghi rolled out monetary stimulus last month that included more negative interest rates and renewed quantitative easing, but said the effectiveness of policy hinges on increased government spending. He will likely repeat this mantra at his final press conference as president on Thursday (24 October).

German Finance Minister Olaf Scholz has tried to deflect the pressure to boost spending. Speaking at the annual International Monetary Fund last week (ended 18 October), he insisted his country has already done a lot and the economic situation does not require a rushed fiscal response. – Bloomberg News.

The Stoxx Europe 600 Index inched 0.09% higher to 394.59 on Tuesday.

 

JAPAN

When Samurai Scientist, the latest release from WhistlePig LLC Whiskey’s Boss Hog series, arrives on shelves later this month, it will not stay for long. It is the world’s first rye finished in Japanese Umeshu barrels, and the name – and its pewter samurai topper – is a nod to Jokichi Takamine, the “samurai chemist” who is credited with sharing traditional Japanese fermentation techniques with western whiskey makers in the early 20th century.

It also matches the most expensive price that the Vermont-based distillery has ever charged for its rye. Even at USD500, it is still less than what you will find on the secondary market, the purview of collectors and connoisseurs. In 2016, WhistlePig released an Armagnac-finished liquid that now fetches upward of USD1,000 on resale sites.

The release highlights the changing fortunes of rye over the last decade as the spirit shakes off its reputation as a less expensive alternative to bourbon. Bottles are now carrying price tags typically worn by single malt scotch. Once the most consumed style of spirit in the US, rye had been in steady decline since prohibition. By 2006, an estimated 150,000 nine-litre cases of rye whiskey were sold in the country, compared with 14.7m cases of bourbon, according to the Distilled Spirits Council.

The modern cocktail renaissance changed all that. Bartenders interested in resurrecting turn-of-the-century recipes discovered many that were built around rye. Distillers and distributors lined up to get the liquid into back bars and onto menus. Since 2009, sales have increased 1,100%, growing to 1.1m cases in 2018.

Transferring spirit into a secondary barrel after initial maturation is not unique to rye. The category just happens to be better suited to the practice than many of its casked counterparts.

As stocks of the spirit mature in warehouses across North America, the value of what is in those barrels continues to soar. A USD500 bottle might soon seem like a bargain for a rye that perhaps spent time in casks formerly belonging to ice wine, walnut liqueur, or amaro. When it comes to funky finishes, this category is just getting started. – Bloomberg News.

The Nikkei 225 Index advanced 0.24% to 22,603.18 at the open of Wednesday (23 October) morning. Japan markets were closed for Enthronement ceremony on Tuesday.


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