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Beyond the Numbers

Renewed Uncertainty About Trade Deal May Weigh On Wall Street
11/13/2019 8:52 AM

The major U.S. index futures are pointing to a lower opening on Wednesday following the lackluster performance seen over the past few sessions.

Renewed uncertainty about a potential U.S.-China trade deal may weigh on the markets after President Donald Trump failed to offer many details about the trade talks in a speech on Tuesday.

Early trading activity may be somewhat subdued, however, as traders wait for congressional testimony from Federal Reserve Chairman Jerome Powell.

Traders are likely to keep a close eye on Powell’s testimony before the Congressional Joint Economic Committee for clues about the outlook for interest rates.

Trump renewed his attacks on the Fed during his remarks on Tuesday, claiming the economy and the markets would be even stronger if the central bank would take his advice and slash interest rates further.

Stocks showed a lack of direction over the course of the trading session on Tuesday, extending the lackluster performance seen over the two previous sessions. Despite the choppy trading, the tech-heavy Nasdaq ended the session at new record closing high.

While the Nasdaq rose 21.81 points or 0.3 percent to 8,486.09 and the S&P 500 edged up 4.83 points or 0.2 percent to 3,091.84, the Dow ended the day unchanged at 27,691.49.

Traders initially seemed reluctant to make significant moves ahead of President Donald Trump's speech at the Economic Club of New York this afternoon.

Activity remained light after Trump spoke, however, as he failed to provide details about the state of trade talks between the U.S. and China.

Trump claimed the Chinese are "dying to make a deal" and an agreement is "close," although investors had been hoping for more substantive comments from the president.

The president said a significant phase one trade deal with China "could happen soon" but stressed that he would only accept an agreement that is good for U.S. companies and workers.

Trump later denied that his trade war with China is hurting industry or causing uncertainty and threatened further increases in tariffs if a deal is not reached.

The president spent the bulk of his remarks touting the strength of the U.S. economy, crediting his policies cutting taxes and regulation for the growth seen in recent years.

Reflecting the lackluster performance by the broader markets, most of the major sectors ended the day showing only modest moves.

Oil service stocks showed a significant move to the downside, however, with the Philadelphia Oil Service Index falling by 1.5 percent. The weakness in the oil service sector came amid a modest decrease by the price of crude oil.

Telecom stocks also saw notable weakness on the day, while gold stocks moved higher as the price of the precious metal turned positive in electronic trading.

Commodity, Currency Markets

Crude oil futures are slipping $0.27 to $56.53 a barrel after edging down $0.06 to $56.80 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,462.50, up $8.80 compared to the previous session’s close of $1,453.70. On Tuesday, gold fell $3.40

On the currency front, the U.S. dollar is trading at 108.78 yen compared to the 109.01 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1005 compared to yesterday’s $1.1009.

Asia

Asian stocks fell on Wednesday after U.S. President Donald Trump dangled the prospect of completing an initial trade deal with China “soon,” but at the same time threatened further increase in tariffs if a trade deal is not reached. Worries about growing unrest in Hong Kong also kept underlying sentiment cautious.

China's Shanghai Composite Index dropped 9.58 points, or 0.3 percent, to 2,905.24 after Trump threatened to raise tariffs on China "substantially" if the two countries fail to strike a trade deal.

Hong Kong's Hang Seng Index plunged 493.82 points, or as 1.8 percent, to 26,571.46 after an escalation of violence. Hong Kong's security chief John Lee cautioned that "unthinkable" consequences may come if the violence continued.

Japanese shares declined as the yen continued to appreciate against the dollar amid an escalating crisis in Hong Kong and the lack of material progress in U.S.-China trade talks. The Nikkei 225 Index shed 200.14 points, or 0.9 percent, to finish at 23,319.87, while the broader Topix closed 0.6 percent lower at 1,700.33, snapping a six-day winning streak.

Nissan Motor slid half a percent after the company reported a 70 percent drop in quarterly profit and cut its full-year outlook.

E-commerce settlement service firm GMO Payment Gateway slumped 9.3 percent after its quarterly earnings and profit guidance for the year to next September fell short of market expectations.

On the other hand, shares of Fujifilm soared 6.3 percent after the company forecast a record annual profit.

Australian markets retreated amid lingering uncertainty about whether, and when, the United States and China will agree to a long-awaited deal to end their bitter trade dispute.

The benchmark S&P/ASX 200 Index dropped 54.60 points, or 0.8 percent, to 6,698.40. while the broader All Ordinaries Index ended down 51.50 points, or 0.8 percent, at 6,805.60.

Miners BHP, Rio Tinto and Fortescue Metals Group declined 1-2 percent, while energy stocks such as Oil Search, Origin Energy and Woodside Petroleum lost around 1 percent.

Lender Westpac Banking Corp. declined 1.3 percent to extend losses. Commonwealth Bank of Australia shed 2 percent after announcing changes to its executive leadership team.

Meanwhile, Bingo Industries shares surged 10.7 percent after the waste manager projected its full-year underlying earnings to rise by as much as 55 percent.

Seoul stocks fell after Trump didn't offer any concrete details on ongoing trade talks with China. The Kospi ended down 18.47 points, or 0.9 percent, at 2,122.45.

In economic news, South Korea's jobless rate climbed to a seasonally adjusted 3.5 percent in October from 3.4 percent in September, figures from Statistics Korea showed.

Europe

European stocks have fallen on Wednesday as anti-government protests in Hong Kong entered a third consecutive day of violent unrest.

Investors are also fretting about a potential U.S.-China trade deal after U.S. President Donald Trump threatened further increases in tariffs if a trade deal is not reached.

While the German DAX Index has fallen by 0.5 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are down by 0.3 percent and 0.2 percent, respectively.

Banks are among the prominent losers, while tariff-sensitive automakers such as BMW, Volkswagen and Peugeot have also moved to the downside.

Miners are also trading lower amid lingering uncertainty about whether, and when, the United States and China will agree a long-awaited deal to end their bitter trade dispute.

Commercial broadcaster ProSiebenSat.1 has tumbled after Italy's Mediaset ruled out a full takeover of the company.

Real estate investment company Deutsche EuroShop has also fallen after lowering its earnings and sales guidance for fiscal 2020.

Leoni has also slumped as it reported a third quarter consolidated net loss of 88 million euros, compared to net income of 23 million euros in the previous year quarter.

On the other hand, Deutsche Wohnen has rallied after the property company decided to buy back up to 25 million shares of the company.

Smiths Group has also advanced. The engineering company kept its full-year outlook after reporting double-digit growth in first quarter revenue.

U.S. Economic Reports

Partly reflecting a substantial rebound in energy prices, the Labor Department released a report showing U.S. consumer prices rose by slightly more than anticipated in the month of October.

The Labor Department said its consumer price index climbed by 0.4 percent in October after coming in unchanged in September. Economists had expected consumer prices to rise by 0.3 percent.

Excluding food and energy prices, core consumer prices edged up by 0.2 percent in October after a 0.1 percent uptick in September. The uptick in core prices matched economist estimates.

Federal Reserve Chairman Jerome Powell is scheduled to testify before the Congressional Joint Economic Committee in a hearing on “The Economic Outlook” in Washington, D.C., at 11 am ET.

At 12:30 pm ET, Richmond Fed President Tom Barkin is due to speak at the Greensboro Chamber of Commerce on “The New Environment for Monetary Policy” in Greensboro, North Carolina.

Minneapolis Fed President Neel Kashkari is slated to speak in a town hall at the University of Wisconsin-La Crosse Student Union in La Crosse, Wisconsin, at 1:30 pm ET.

At 7:30 pm ET, Philadelphia Fed President Patrick Harker is scheduled to speak about the economic outlook at the 25th Annual Certified Commercial Investment Member Joint Dinner in Wilmington, Delaware.

Stocks In Focus

Shares of Skyworks Solutions (SWKS) are seeing notable pre-market weakness after the semiconductor company reported fiscal fourth quarter earnings that beat estimates but a steep drop in revenues.

Canadian cannabis company Tilray (TLRY) may also move to the downside after reporting a wider third quarter loss amid lower prices.

On the other hand, shares of Canada Goose (GOOS) are likely to see initial strength after the outdoor apparel maker reported better than expected fiscal second quarter results.
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