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Beyond the Numbers

Futures Pointing To Roughly Flat Open On Wall Street
11/8/2019 8:55 AM

The major U.S. index futures are currently pointing to a roughly flat opening on Friday, as traders seem likely to retreat to the sidelines once again.

Stocks may resume the lackluster performance seen earlier in the week amid renewed uncertainty about a potential U.S.-China trade deal.

News U.S. and Chinese negotiators had agreed to roll back existing tariffs as part of a phase one trade deal contributed to early strength on Thursday.

However, buying interest waned after a report from Reuters said the idea faces fierce internal opposition from President Donald Trump’s advisers.

Multiple sources familiar with the talks told Reuters the idea of a tariff rollback was not part of the original October “handshake” deal between Trump and Chinese Vice Premier Liu He.

Citing current and former administration officials, Reuters said there is a divide within the administration over whether rolling back tariffs will give away U.S. leverage in the negotiations.

The latest reports have sparked renewed uncertainty about what type of trade deal Trump will ultimately be willing to accept.

Trump has repeatedly criticized past administrations for being too weak on China, but he would also like a big political victory ahead of next year’s presidential election.

After sticking to the sidelines for two consecutive sessions, traders rushed back into the markets in early trading on Thursday amid signs of progress in U.S.-China trade talks. The major averages reached new record intraday highs but gave back some ground as the day progressed.

Nonetheless, the major averages managed to remain in positive territory, with the Dow and the Nasdaq ending the day at new record closing highs.

The Dow advanced 182.24 points or 0.7 percent to 27,674.80, the Nasdaq climbed 23.89 points or 0.3 percent to 8,434.52 and the S&P 500 rose 8.40 points or 0.3 percent to 3,085.18.

The early strength on Wall Street came after a spokesman for the Chinese Commerce Ministry said the U.S. and China have agreed to lift existing tariffs in phases.

"The trade war started with tariffs and should end with the cancellation of tariffs," said ministry spokesman Gao Feng, who noted phase one of a trade deal must include both countries simultaneously canceling tariffs on each other's goods.

The U.S. has widely been expected to scrap tariffs on about $156 billion worth of Chinese imports currently set to take effect on December 15th as part of phase one.

"Both sides have agreed to cancel additional tariffs in different phases, as both sides make progress in their negotiations," Gao added without providing a timetable.

A report from Reuters said an anonymous U.S. official confirmed the planned rollback as part of a phase one trade agreement President Donald Trump and Chinese President Xi Jinping hope to sign before the end of the year.

However, the Reuters report also noted the prospect of lifting tariffs, even in phases, has drawn fierce opposition from many of Trump's advisers, contributing to a notable pullback by stocks.

In U.S. economic news, the Labor Department released a report showing a bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended November 2nd.

The report said initial jobless claims slid to 211,000, a decrease of 8,000 from the previous week's revised level of 219,000.

Economists had expected jobless claims to dip to 215,000 from the 218,000 originally reported for the previous week.

Networking stocks pulled back off their best levels but still ended the day significantly higher, with the NYSE Arca Networking Index jumping by 2 percent.

Within the networking sector, CommScope (COMM) posted a standout gain after reporting better than expected third quarter earnings.

Considerable strength also remained visible among steel stocks, as reflected by the 1.7 percent gain posted by the NYSE Arca Steel Index. The index ended the session at a three-month closing high.

Telecom, oil, and chemical stocks also saw notable strength on the day, while gold stocks showed a substantial move to the downside amid a steep drop by the price of the precious metal.

Utilities, tobacco, and housing stocks also came under pressure over the course of the session, partly offsetting the strength seen in the aforementioned sectors.

Commodity, Currency Markets

Crude oil futures are slumping $0.84 to $56.31 a barrel after climbing $0.80 to $57.15 a barrel on Thursday. Meanwhile, after plummeting $26.70 to $1,466.40 an ounce in the previous session, gold futures are sliding $5.30 to $1,461.10 an ounce.

On the currency front, the U.S. dollar is trading at 109.34 yen versus the 109.28 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1033 compared to yesterday’s $1.1050.

Asia

Asian stocks ended mixed on Friday as investors reacted to conflicting messages about the state of U.S.-China trade talks.

Trade deal optimism waned a little bit after reports suggested that a plan to roll back tariffs in phases has met opposition from some advisers to U.S. President Donald Trump.

Chinese shares ended lower even as data showed China's exports and imports contracted less than expected in October. The benchmark Shanghai Composite Index shed 14.53 points, or 0.5 percent, to finish at 2,964.18, while Hong Kong's Hang Seng Index dropped 196.09 points, or 0.7 percent, to 27,651.14.

Chinese exports fell 0.9 percent year-on-year in dollar terms, declining for the third straight month. Economists had expected a 3.9 percent slump following September's 3.2 percent contraction.

Imports declined 6.4 percent from a year earlier, slower than the forecast of a 7.8 percent fall. This was the sixth consecutive decrease, reflecting subdued demand.

Japanese shares hit a 13-month high after data showed the country's household spending rose at the fastest pace on record in September. The average of household spending in Japan rose an annual 9.5 percent in real terms in September, beating forecasts for an increase of 7.0 percent following the 1.0 percent gain in August.

The Nikkei 225 Index rose 61.55 points, or 0.3 percent, to 23,391.87, while the broader Topix closed 0.3 percent higher at 1,702.77, its highest level in more than a year.

Automaker Toyota rallied 2.2 percent after announcing a $1.8 billion share buyback. Medical equipment maker Terumo soared 13.4 percent and department store operator Isetan Mitsukoshi jumped 11.7 percent after posting strong quarterly earnings.

On the other hand, cosmetics maker Shiseido slumped 8.3 percent after lowering its full-year forecast.

Australian markets ended little changed with a negative bias. Financials extended gains from the previous session, with banks ANZ, Commonwealth and NAB rising between 0.2 percent and half a percent.

An overnight rally in oil prices lifted energy stocks, with Woodside Petroleum rallying 2 percent after raising its estimate for dry gas reserves at its Scarborough project. Santos advanced 1.5 percent and Origin Energy climbed 2.1 percent.

Meanwhile, gold miner Evolution Mining slumped 5.8 percent, Newcrest lost 4.6 percent and Norther Star Resources plunged 6.6 percent as gold lingered near one-month lows on positive trade-related headlines.

News Corp. lost 5 percent after impairment charges against its advertising business resulted in the media company reporting a first quarter loss.

REA Group tumbled 3.6 percent as it reported a 14 percent decrease in first-quarter group earnings excluding joint ventures and associates.

Seoul stocks turned lower as investors locked in some recent gains. The benchmark Kospi dropped 7.06 points, or 0.3 percent, to 2,137.23, with technology stocks pacing the decliners. Samsung Electronics fell 1.5 percent and SK Hynix declined 1.6 percent.

Europe

European stocks have fallen on Friday as conflicting messages over U.S.-China trade talks unnerved markets, offsetting better than expected trade data from China.

Reuters reported that a plan to roll back tariffs in phases has met opposition from some advisers to U.S. President Donald Trump, raising concerns about whether the two sides are really getting close to signing a phase one trade deal.

While the U.K.’s FTSE 100 Index has fallen by 0.5 percent, the German DAX Index is down by 0.4 percent and the French CAC 40 Index is down by 0.3 percent.

Miners have been among the hardest hit, with Anglo American, Antofagasta and Glencore showing notable moves to the downside.

Insurer Phoenix Group Holdings has slumped after former Aviva UK boss Andy Briggs was named as the new chief executive of the company.

Crédit Agricole shares have also tumbled despite the French lender delivering a third quarter net profit above expectations.

Insurance and asset management company Allianz has also moved lower after posting muted third quarter profit growth.

Swiss luxury goods group Compagnie Financiere Richemont has also tumbled after sales growth slowed in the first half.

On the other hand, Lloyd's insurer Beazley Group has moved sharply higher. The company reported that the Group's Gross premiums written for the nine months ended September 30, 2019 increased by 12 percent year on year to $2.19 billion.

In economic news, German exports rebounded at a faster than expected pace in September, despite signs of a mild recession, data from Destatis revealed.

Exports grew 1.5 percent month-on-month, in contrast to August’s 0.9 percent decrease. Shipments were forecast to grow only 0.3 percent.

Imports growth accelerated to 1.3 percent from 0.1 percent a month ago, while economists had forecast stagnation.

U.K. hiring activity remained subdued in October, dampened by political and economic uncertainty, the Report on Jobs from IHS Markit showed.

According to the Recruitment & Employment Confederation/KPMG report, permanent job placements declined at a solid pace in October, as employers preferred to wait until there was greater clarity over the outlook on Brexit. At the same time, temp billings growth weakened to only a marginal pace.

U.S. Economic Reports

At 10 am ET, the University of Michigan is scheduled to release its preliminary reading on consumer sentiment in the month of November. The consumer sentiment index is expected to inch up to 95.9 in November after rising to 95.5 in October.

The Commerce Department is also due to release its report on wholesale inventories in the month of September at 10 am ET. Wholesale inventories are expected to dip by 0.3 percent.

At 11:45 am ET, San Francisco Federal Reserve President Mary Daly is scheduled to give opening remarks at an Economics of Climate Change research conference in San Francisco, California.

New York Fed President John Williams is slated to speak in a moderated discussion at the "Coping with the Vulnerabilities of the Global Financial System" Roundtable Dinner in New York at 8 pm ET.

At 8:35 pm ET, Fed Governor Lael Brainard is due to give closing remarks at the Economics of Climate Change conference in San Francisco.

Stocks In Focus

Entertainment giant Disney (DIS) is seeing considerable pre-market strength after reporting fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Monster Beverage (MNST) are also moving significantly higher in pre-market trading after the energy drink maker reported better than expected third quarter results and announced a new $500 million share repurchase program.

Real estate website operator Zillow (Z) is also likely to see initial strength after reporting a narrower than expected third quarter loss on revenues that exceeded analyst estimates.

On the other hand, shares of Gap (GPS) are likely to come under pressure after the apparel retailer lowered its full-year guidance and announced its president and chief executive officer Art Peck will step down.
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