Global markets fly out of holiday lethargy on Boeing CEO shakeup
Festive world markets pause for breath near record highs
NEW YORK: The surprise announcement that Boeing ousted its embattled CEO invigorated Wall Street, while trading was muted on European and Asian stock markets as many investors were already away for Christmas. Shares of Boeing climbed around three percent after the aviation giant announced it was ousting Dennis Muilenburg as chief executive, replacing him with David Calhoun as the grounding of the 737 MAX drags on after two deadly crashes. Gains by Boeing helped the Dow to score its third straight record, lifting the blue-chip index by 0.3 percent. The S&P 500 and Nasdaq also ended at records.
World stocks flatlined near record highs and remained on track for their best year in a decade, as China’s latest policy easing pledges added to the optimism generated by signs of detente in the 17-month long Sino-US trade war.
Blue-chip shares in China rose 0.7 percent after Premier Li Keqiang said the government was considering more measures to lower corporate financing costs and hinted at “targeted” cuts in banks’ reserve requirement ratio. Beijing also on Monday announced plans to remove import tariffs on a range of goods next year. However, lingering trade concerns and the recent run of gains kept most bourses under pressure, with Korean shares weakening 0.7 percent, pressured by Monday’s data that showed exports in the first 20 days of the month had fallen again.
MSCI’s index of Asia-Pacific shares outside Japan was likewise flat while its all-country benchmark was unchanged, having added 3 percent this month and 24 percent since the start of 2019.
A pan-European equity index also hovered near record highs though many continental markets were closed for Christmas and others saw thin trading volumes. “It’s been a strong run up to Christmas for stock markets and it seems traders are taking a little breather in this shortened trading week,” said Craig Erlam, an analyst at online broker OANDA. “It’s been a good few weeks for investors, spurred primarily by the de-escalation in the trade war, with Trump only this weekend claiming it will be signed very shortly.”
He was referring to comments by President Donald Trump on Saturday, which spurred Wall Street to new alltime highs on Monday. The S&P 500 hit its eighth straight intraday record. New York was also lifted by a 3 percent surge in Boeing which sacked CEO Dennis Muilenberg over the crisis surrounding its 737 MAX jetliner that followed two fatal crashes. Equity futures hinted at a flat to firmer open for Wall Street .
Stellar year but what next
World markets are heading into the end of a stellar year, with most major asset classes, from emerging market bonds to US tech shares, enjoying robust returns.
But uncertainty remains on how long the trade truce will last as Trump kicks off his re-election campaign next year. Worries have also resurfaced about how Britain will navigate the transition period for its exit from the European Union. Those concerns pushed sterling to a near four-week low versus the euro and a three-week trough against the dollar.
The pound was flat at $1.2927 versus highs above $1.35 after the Dec. 12 general election. Against the euro it was at 85.720 pence, coming off the Dec. 13 highs of 82.780 pence. “Risks to the outlook receded this year, which supported financial markets, but we cannot say the same thing about next year,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
Euro zone bond markets were shut but 10-year US Treasury yields slipped one basis point to 1.926 percent after Monday’s slight rise following lacklustre demand for two-year bills at auction.
However, yields have risen more than 20 basis points off the 1.69 percent levels of early December, lifted by the equity rally and signs the US Federal Reserve has paused its rate-cutting cycle. In Japan, two-year bond yields hit 16-month highs after the message from the minutes of the Bank of Japan’s meeting prompted money markets to erase rate cut expectations. Brent oil futures ticked up 0.2 percent after Russia’s energy minister said cooperation with OPEC to support prices would continue.
Meanwhile, more positive news on the US-China trade front also boosted sentiment, as Beijing said it will lower import tariffs on more than 850 products including frozen pork from next month. And while the move does not appear to be linked to the bruising trade war between China and the US, which has seen Washington and Beijing exchanging levies on goods worth hundreds of billions of dollars, it will likely help reduce tensions.
The news “has lifted the mood on Wall Street,” said analyst David Madden at CMC Markets UK.
In Europe trading was muted, which many investors taking a break for the holidays. Global equities have enjoyed a flourish as they head towards the end of the year, having been on a roller-coaster ride for 12 months owing to the long-running US-China trade row and Brexit. “It’s been a strong run up to Christmas for the stock markets and it seems traders are taking a little breather in this shortened trading week,” said analyst Craig Erlam at trading firm Oanda.
“It’s been a good few weeks for investors, spurred primarily by the de-escalation in the trade war, with Trump ... claiming it will be signed very shortly.” Observers say that with those two major issues looking less uncertain, 2020 could see a healthy run-up in prices, boosted by looser central bank monetary policy and signs of improvement in economies around the world. With very little by way of market-moving events on the horizon, analysts are expecting a quiet week. — Agencies