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On 29 January 2019 - Global stocks mixed ahead of Fed meeting, Brexit debate and US-China trade talks

Anne D Picker

Anne D Picker - Econoday

Apple earnings in line with expectations; Chinese authorities condemn US charges against Huawei.

US markets

US stocks were mixed Tuesday ahead of key upcoming events including Apple earnings, the FOMC meeting, US-China trade talks, and another Brexit debate in the UK parliament. The Dow closed up 0.2 percent on the day, while the S&P fell 0.1 percent. Tech companies underperformed, with the Nasdaq falling 0.8 percent.

Apple and AMD reported fourth-quarter earnings just after the New York close Tuesday. Apple reported earnings of US$4.18 per share, just above analysts’ expectation of US$4.17, while AMD reported earnings of $0.08 per share, in line with expectations.

Manufacturer 3M closed higher after reporting fourth-quarter earnings of US$2.31 per share, above analysts’ expectations of US$2.28 per share. The company reported solid revenue growth but was negatively impacted by currency moves. Revenue guidance was lowered for 2019, with the company citing slower growth in China and the automotive and electronic sectors.

US authorities laid criminal indictments against Chinese telecoms company Huawei Technologies shortly after the close of trading in New York on Monday. Acting US Attorney General Matthew Whittaker announced that the company has been charged with stealing trade secrets from a rival, T-Mobile, and breaching sanctions against Iran. The US will also seek to extradite Huawei’s chief financial officer, Meng Wanzhou, currently detained by Canadian authorities.

This announcement came just two days ahead of scheduled US-China trade negotiations in Washington. US Treasury Secretary Steve Mnuchin insisted that the Huawei charges are a separate issue and should not impact trade negotiations. Tariff rates on Chinese goods are scheduled to increase from 10 percent to 25 percent at the start of March unless a deal can be reached, with US officials seeking progress on issues such as market access and intellectual property protection.

PG&E, California’s largest utility company, posted a strong gain after filing for bankruptcy but remains well below previous levels. The company is facing more than $30 billion in potential liability costs after authorities found its power lines had caused several major wildfires in recent years.

Trade and inventories data scheduled for release Tuesday were delayed as officials return to work after the government shutdown. The shutdown appears to have had a significant impact on consumer sentiment, with the Conference Board’s confidence indicator falling sharply for a second consecutive month from 126.6 in December to 120.0 in January. The index is now down 16.2 points since November, the steepest decline since the 2008 recession. The survey, however, indicates that consumers remain positive about current conditions, mainly reflecting ongoing strength in the labour market, suggesting that the impact of the shutdown on confidence may be short-lived. The Redbook survey of retail sales showed a fall in same-store year-on-year growth from 7.0 percent to 5.8 percent in the week of January 26.

These data reflect observations at 4:00 PM US ET. Gold gained US$7.50 to US$1,316.80 and dated Brent spot crude was up US$1.19 to US$61.12. The US dollar made a solid gain against the pound, but other currency moves were subdued, with the US dollar up moderately against the Swiss franc, the Australian dollar, and the Canadian dollar, flat against the yen, and down slightly against the euro and the yuan. The yield on the US Treasury 30 year bond was down 2 basis points at 3.04 percent while the 10 year note fell 3 basis points to 2.71 percent.

European markets

European markets advanced Tuesday ahead of the UK parliament debating the government’s revised Brexit. The FTSE closed 1.3 percent higher on the day, while the CAC gained 0.8 percent. The DAX underperformed, up just 0.1 percent.

The UK parliament’s latest Brexit debate is taking place now. The government’s revised proposal is only slightly different from the proposal that was comprehensively rejected earlier in the month but the debate should provide greater clarity about what further changes would be required to get through parliament. It remains unclear, however, whether the European Union would accept such changes. Officials from the UK government and the European Union have reiterated their commitment to ensuring that the land border between the United Kingdom and the Republic of Ireland remains open and easily crossed, but Brexit supporters remain concerned that this will leave parts or all of the UK within the EU’s customs union indefinitely.

Swiss data showed a fall in the trade surplus from CHF4.74 billion in November to CHF1.90 billion in December but quarterly data for the three months to December shows a larger surplus than in the three months to September, indicating that net exports will make a solid contribution to headline economic growth. Annual data also show strong growth in both exports and imports in 2018.

Asia Pacific Markets

Asian markets were mixed Tuesday. Australia’s All Ordinaries index underperformed after a market holiday on Monday, down 0.5 percent on the day, with declines also posted in Taiwan, Singapore, India, China, and Hong Kong. In Japan the Nikkei and Topix both rose 0.1 percent, with Korea’s KOSPI index closing 0.3 percent higher.

China’s foreign ministry described the US charges laid against Huawei as “politically motivated” and part of efforts to suppress competition by Chinese companies. In an apparent effort to boost consumer spending and offset the impact of foreign restrictions on Chinese tech companies, officials announced Tuesday that they will speed up the issuance of 5G commercial licences to domestic firms.

New Zealand data published Tuesday showed a shift from a revised monthly deficit of NZ$955 million in November to a surplus of NZ$264 million in December. This is New Zealand's first trade surplus since May 2018. Exports fell on the year but rose strongly on the month. In annual terms, higher global oil prices helped to push the trade deficit to NZ$5.9 billion in 2018, the largest since 2007.

Looking forward

Australian CPI data is the highlight of the Asia-Pacific data calendar, with French GDP and German inflation data the main focus in Europe. US GDP data scheduled for release Wednesday may be delayed. The Federal Reserve is expected to keep policy on hold at Wednesday’s FOMC meeting, with Fed Chairman Jerome Powell scheduled to speak after the meeting.

Global Stock Markets

 

Index

29 Jan 2019

Daily Change

% Chnage Daily

North America

 

 

 

 

United States

Dow

24579.96

51.74

0.2

 

NASDAQ

7028.29

-57.40

-0.8

 

S&P 500

2640.00

-3.85

-0.1

Canada

S&P/TSX Comp

15463.14

84.52

0.5

Europe

 

 

 

 

UK

FTSE 100

6833.93

86.83

1.3

France

CAC

4928.18

39.60

0.8

Germany

XETRA DAX

11218.83

8.52

0.1

Italy

MIB

19701.60

93.47

0.5

Spain

Ibex 35

9119.10

56.70

0.6

Sweden

OMX Stockholm 30

1502.72

11.71

0.8

Switzerland

SMI

8940.52

82.67

0.9

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

5939.54

*

*

Japan

Nikkei 225

20664.64

15.64

0.1

 

Topix

1557.09

1.58

0.1

Hong Kong

Hang Seng

27531.68

-45.28

-0.2

S. Korea

Kospi

2183.36

6.06

0.3

Singapore

STI

3187.69

-8.77

-0.3

China

Shanghai Comp

2594.25

-2.73

-0.1

Taiwan

TAIEX

9931.59

-81.74

-0.8

India

Sensex 30

35592.50

-64.20

-0.2

* Market closed
Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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