Market Analysis

Beyond the Numbers

Buying Interest May Re-emerge After Yesterday’s Weakness
11/21/2019 9:01 AM

The major U.S. index futures are pointing to a slightly higher opening on Thursday, with stocks likely to see initial strength after coming under pressure over the course of the previous session.

The modest upward momentum on Wall Street comes after a report from the Wall Street Journal said China’s chief trade negotiator has invited his American counterparts to Beijing for a new round of face-to-face talks.

Citing people briefed on the matter, the WSJ said Chinese Vice Premier Liu He extended the invitation to U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin during a phone call late last week.

The report of the invitation for a new round of talks comes amid renewed uncertainty about the potential for the U.S. and China to finalize a phase one trade deal.

President Donald Trump told reporters on Wednesday that he has not made a trade deal with China yet because Beijing is not “stepping up to the level that I want.”

Stocks climbed well off their worst levels of the day but still ended Wednesday's trading firmly in negative territory. The major averages all moved to the downside after ending the previous session on opposite sides of the unchanged line.

After reaching a record closing high on Tuesday, the Nasdaq slid 43.93 points or 0.5 percent to 8,526.73, while the Dow fell 112.93 points or 0.4 percent to 27,821.09 and the S&P 500 dropped 11.72 points or 0.4 percent to 3,108.46.

Renewed uncertainty about a U.S.-China trade deal weighed on the markets after a report from the Wall Street Journal said trade talks are in danger of hitting an impasse.

Citing former administration officials and others following the talks, the WSJ said the potential impasse threatens to derail the Trump administration's plan for a limited phase one deal this year.

The Journal said both sides remain divided over core issues, including China's demand for removing tariffs and the U.S.'s insistence on China buying farm products.

The report from the WSJ comes after President Donald Trump threatening higher tariffs on Chinese goods if an agreement is not reached.

"If we don't make a deal with China, I'll just raise the tariffs even higher," Trump said during a cabinet meeting at the White House on Tuesday.

Trump said he was happy with the current trade situation, citing the billions of dollars brought in by tariffs, and declared, "China is going to have to make a deal that I like."

Stocks saw some further downside in afternoon trading after a report from Reuters said completion of a phase one U.S.-China trade deal could slide into next year.

Trade experts and people briefed on the talks told Reuters a deal is still elusive and negotiations may be getting more complicated.

Reuters said the delay in signing the deal comes as China presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.

However, stocks climbed well off their lows of the session as traders have recently shown a knack for shrugging off negative news on the trade front amid unshakable optimism a deal will eventually get done.

Transportation stocks showed a significant move to the downside over the course of the session, dragging the Dow Jones Transportation Average down by 1.4 percent.

Notable weakness also emerged among chemical and semiconductor stocks, with the S&P Chemical Sector Index and the Philadelphia Semiconductor Index sliding by 1.3 percent and 1.2 percent, respectively.

On the other hand, tobacco stocks turned in a strong performance on the day, resulting in a 1.3 percent advance by the NYSE Arca Tobacco Index.

Biotechnology stocks also saw considerable strength, driving the NYSE Arca Biotechnology Index up by 1.1 percent to a four-month closing high.

Commodity, Currency Markets

Crude oil futures are rising $0.30 to $57.31 a barrel after soaring $1.66 to $57.01 a barrel on Wednesday. Meanwhile, after edging down $0.10 to $1,474.20 an ounce in the previous session, gold futures are slipping $3.70 to $1,470.50 an ounce.

On the currency front, the U.S. dollar is trading at 108.57 yen compared to the 108.61 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1079 compared to yesterday’s $1.1073.


Asian stocks fell on Thursday on concerns a phase one trade deal between the U.S. and China may not be reached this year.

Adding to the tensions between the world's two biggest economies, the U.S. House of Representatives on Wednesday passed a Senate bill supporting protesters in Hong Kong and sending a warning to China about human rights. President Donald Trump is expected to sign the legislation passed by both chambers of Congress.

Chinese stocks fell to extend losses for the second straight day on concerns the crackdown on anti-government protests in Hong Kong could imperil a preliminary trade deal with the United States.

The benchmark Shanghai Composite Index dropped 7.42 points, or 0.3 percent, to 2,903.64, while Hong Kong's Hang Seng Index tumbled 1.6 percent to 26,466.88.

Japanese shares hit a three-week low, though markets ended well off their day's lows after Bloomberg News quoted China's Vice Premier Liu He as saying that he was "cautiously optimistic" on a phase one trade deal.

The Nikkei 225 Index slid 109.99 points, or 0.4 percent, to 23,038.58 points, its lowest closing level since November 1st. The broader Topix index closed 0.1 percent lower at 1.689.38.

Semiconductor-related stocks fell on profit taking after recent sharp gains, with Tokyo Electron, Advantest and Screen Holdings losing 3-4 percent.

Heavyweight SoftBank Group fell 1.6 percent on reports the tech conglomerate is in talks for a loan of about 300 billion yen ($2.8 billion) from Japan's leading banks.

Australian markets fell notably after the financial crime fighting agency accused Westpac, the country's second-largest bank by assets, of the biggest breach of money laundering laws in the nation's history.

The benchmark S&P/ASX 200 Index dropped 49.50 points, or 0.7 percent, to 6,672.90, while the broader All Ordinaries Index ended down 50.60 points, or 0.7 percent, at 6,777.70.

Westpac shares declined 2 percent, while the other three big banks ended down around half a percent on concerns that they might divulge similar breaches. Miners BHP, Fortescue Metals Group and Rio Tinto fell 1-2 percent.

Meanwhile, Origin Energy hit a more than one-year high before giving up some gains to end the session 0.7 percent higher. Beach Energy declined 1.7 percent, Woodside Petroleum shed 1.2 percent and Santos gave up 1.6 percent.

Clothing retailer Noni B tumbled 3.5 percent after it agreed to acquire a 50.1 percent stake in New Zealand-based clothing and homewares retailer EziBuy for a "nominal consideration."

Seoul stocks extended losses for a fourth day to hit a one-month low as risk-off sentiment prevailed on fresh worries about a further delay in a U.S.-China trade deal. The benchmark Kospi slumped 28.72 points, or 1.4 percent, to end at 2,096.60, the lowest level since October 2nd.

Tech and bio shares paced the decliners. Market heavyweight Samsung Electronics shed 1.9 percent and SK Hynix, the world's No. 2 memory chipmaker, lost 2.2 percent.


European stocks have fallen on Thursday amid concerns a phase one trade deal between the U.S. and China may not be reached this year.

U.S. President Donald Trump told reporters on Wednesday that he has not made a trade deal with China yet because Beijing is not “stepping up” in negotiations. “I don't think they're stepping up to the level that I want,” he said.

A U.S. bill aimed at protecting Hong Kong's freedom also added to tensions between the world's two biggest economies.

While the U.K.’s FTSE 100 Index has slid by 0.8 percent, the French CAC 40 Index and the German DAX Index are both down by 0.1 percent.

Industrial and technology group ThyssenKrupp has moved sharply lower. After reporting a wider fiscal 2019 net loss, the company said it is generally cautious about the current fiscal year 2020.

Fiat Chrysler has also fallen after General Motors sued the company, alleging its rival bribed United Auto Workers union officials over many years to corrupt the bargaining process and gain advantages.

Luxury products maker LVMH Group has also moved to the downside on reports it has increased its offer for jeweler Tiffany & Co.

Royal Mail shares have also slumped. The provider of postal and delivery services warned that poor industrial relations were slowing its ability to change and that its turnaround scheme was behind schedule.

Chemicals company Johnson Matthey has also nearly after its first-half profit fell, hit by one-off costs associated with additional freight costs and problems in its Clean Air division.

On the other hand, Heidelberger Druckmaschinen has jumped after the German precision mechanical engineering firm said it has sold its Hi-Tech Coatings unit to Innovative Chemical Products Group's ISG division.

Direct Line Insurance Group has also moved sharply higher after it laid out a plan to cut expenses and bolster digital presence.

On a light day on the economic front, data from the Office for National Statistics showed the U.K. budget deficit widened more than expected in October.

Public sector net borrowing excluding public sector banks increased by 2.3 billion pounds from last year to 11.2 billion pounds in October. The expected level was 9.3 billion pounds.

A measure of French manufacturing confidence index rose marginally to 100 in November from 99 in October, matching expectations.

U.S. Economic Reports

The Labor Department released a report showing first-time claims for U.S. unemployment benefits came in unchanged in the week ended November 16th.

The report said initial jobless claims came in at 227,000, unchanged from the previous week’s revised level. Economists had expected jobless claims to dip to 219,000 from the 225,000 originally reported for the previous week.

Meanwhile, the Labor Department said the less volatile four-week moving average rose to 221,000, an increase of 3,500 from the previous week's revised average of 217,500.

A separate report from the Philadelphia Federal Reserve showed growth in regional manufacturing activity accelerated by more than anticipated in the month of November.

The Philly Fed said its diffusion index for current general activity climbed to 10.4 in November after falling to 5.6 in October, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 7.0.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of October. Existing home sales are expected to jump by 1.4 percent in October after tumbling by 2.2 percent in September.

The Conference Board is also due to released its report on leading economic indicators in the month of October at 10 am ET. The leading economic index is expected to dip by 0.2 percent.

At 10:10 am ET, Minneapolis Federal Reserve President Neel Kashkari is slated to speak in a moderated discussion at the Minnesota Chamber of Commerce Economic Summit in Minneapolis, Minnesota.

The Treasury Department is due to announce the details of this month’s auctions of two-year, five-year and seven-year notes at 11 am ET.

Stocks In Focus

Shares of Macy’s (M) are moving significantly lower in pre-market trading after the department store chain reported better than expected third quarter adjusted earnings but slashed its full-year guidance.

Discount E*Trade (ETFC) is also seeing notable weakness in pre-market trading after a CNBC report said rival Charles Schwab (SCHW) is in talks to buy TD Ameritrade (AMTD).

On the other hand, shares of Charles Schwab and TD Ameritrade may see initial strength on the news, with a source telling CNBC a deal could be announced as early as today.

Nuance Communications (NUAN) may also move to the upside after reporting fiscal fourth quarter adjusted earnings that beat analyst estimates.
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