Market Analysis

The major U.S. index futures are pointing to a slightly lower open on Wednesday, with stocks likely to move to the downside after ending the previous session modestly higher.

Concerns about political uncertainty may weigh on the markets as House Democrats prepare to impeach President Donald Trump for a second time.

Democrats plan to impeach Trump over allegations that he incited last week’s violent attack on the U.S. Capitol building.

The move by Democrats comes as Vice President Mike Pence has indicated he will not invoke the 25th Amendment as part of an effort to remove Trump from office.

“I do not believe that such a course of action is in the best interest of our Nation or consistent with our Constitution,” Pence wrote in a letter to House Speaker Nancy Pelosi.

In U.S. economic news, the Labor Department released a report showing U.S. consumer prices increased in line with economist estimates in the month of December.

U.S. stocks ended slightly higher on Tuesday after a somewhat lackluster session, as investors largely refrained from making significant moves.

Political tensions in the U.S. and worries about rising coronavirus cases weighed on stocks, while optimism about another big fiscal stimulus pushed up prices. Investors were also looking ahead to quarterly earnings reports.

The Dow ended the day with a gain of 60.00 points or 0.2 percent at 31,068.69 after rising to a high of 31,114.56. The S&P 500 edged up 1.58 points less than 0.1 percent to 3,801.19, while the Nasdaq closed up by 36.00 points or 0.3 percent at 13,072.43.

Intel (INTC), General Electric (GE), DuPont (DWDP), Travelers Companies (TRV), Goldman Sachs (GS) and Caterpillar (CAT) gained 2 to 3.5 percent.

Home Depot (HD), JP Morgan Chase (JPM), Chevron (CVX) and Walmart (WMT) also ended notably higher.

Visa (V), Walt Disney (DIS), Merck (MRK), Nike (NKE), McDonalds (MCD) and Microsoft (MSFT) drifted lower.

On the political front, articles of impeachment against U.S. President Donald Trump are under way in the House.

Trump warned that it was dangerous to the United States for him to be impeached. He also claimed his inflammatory comments at a rally shortly before the outbreak of violence in the halls of Congress, which lead to four deaths, were not harmful.

“People thought what I said was totally appropriate," Trump told reporters when he was asked what his personal responsibility was for the violence.

The riot happened after Trump and his family members urged supporters at a rally to fight with him to reverse Joe Biden's Electoral College win.

Commodity, Currency Markets

Crude oil futures are rising $0.43 to $53.64 a barrel after jumping $0.96 to $53.21 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,859, up $14.80 compared to the previous session’s close of $1,844.20. On Tuesday, gold fell $6.60.

On the currency front, the U.S. dollar is trading at 103.87 yen compared to the 103.76 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2165 compared to yesterday’s $1.2207.

Asia

Asian stocks turned in a mixed performance on Wednesday as the U.S. House pressed swiftly forward toward impeachment or other steps to forcibly remove President Donald Trump from office.

The downside, if any, remained limited amid hopes that the incoming Biden administration would ramp up U.S. distribution of coronavirus vaccines, which would allow large parts of the U.S. economy to reopen.

The Biden administration is also expected to push ahead with more fiscal support to help spur growth.

Chinese shares ended lower amid worries about a pickup in coronavirus infections in northern China and rising Sino-U.S. tensions. The benchmark Shanghai Composite index slid 9.69 points, or 0.27 percent, to 3,598.65, while Hong Kong's Hang Seng index ended down 0.15 percent at 28,235.60.

Japanese shares rose for the fifth day despite reports that the government plans to expand the nation's second state of emergency to seven more prefectures.

The Nikkei average climbed 292.25 points, or 1.04 percent, to hit a 30-year high of 28,456.59. The broader Topix index closed 0.35 percent higher at 1,864.40.

Chip-related shares followed their U.S. peers higher, with Advantest and Tokyo Electron both rising over 5 percent. Renesas Electronics jumped 4.7 percent to extend recent gains.

On the flip side, film distributor Toho lost 6.7 percent after releasing its earnings outlook for the year through February.

Australian markets fluctuated before ending slightly higher for the day. The benchmark S&P/ASX 200 edged up 7.50 points, or 0.11 percent, to 6,686.60, while the broader All Ordinaries index ended up 14.80 points, or 0.21 percent, at 6,953.90.

The big four banks eked out modest gains. Telecommunications and technology company Telstra rallied 2.7 percent after appointing Geraldine Kor to spearhead South Asia's business growth.

Tech stocks succumbed to selling pressure, with Afterpay losing 1.4 percent and Altium giving up as much as 6.2 percent.

Fashion retailer Premier Investments soared 12.7 percent after announcing it has nearly doubled earnings in the first half of its financial year.

Beach Energy, Santos, Woodside Petroleum and Oil Search surged 4-6 percent as oil prices hovered near 11-month highs after bigger-than-expected inventory draw.

Seoul stocks advanced to snap a two-day losing streak as large caps recovered from recent heavy declines. The benchmark Kospi edged up 22.34 points, or 0.71 percent, to 3,148.29 on retail and foreign buying amid hopes of more stimulus under the Biden administration. Chipmaker SK Hynix climbed 3.1 percent and chemical firm LG Chem jumped 4 percent.

Europe

European stocks edged higher on Wednesday as gains in crude prices helped lift energy stocks and investors digested a slew of earnings reports.

The pan European Stoxx 600 edged up 0.2 percent to 409.38 after ending flat with a positive bias the previous day. The German DAX rose 0.2 percent, France's CAC 40 index gained half a percent and the U.K.'s FTSE 100 was up 0.1 percent.

BP Plc rose about 2 percent and Royal Dutch Shell gained 1.5 percent as oil received a boost from a weaker dollar to hover near 11-month highs.

Spectris declined 1.6 percent. The instrumentation company reported that its like-for-like sales in the fourth quarter decreased 7 percent.

Persimmon lost 2 percent. The housebuilder reported total Group revenues of 3.33 billion pounds in 2020, compared to 3.65 billion pounds, prior year.

Recruitment company PageGroup fell over 1 percent. The company reported fourth quarter Group gross profit of 165.5 million pounds, a decline of 20.2 percent in constant currencies year-on-year.

Online food delivery company Just Eat Takeaway.com N.V. slumped 4 percent after announcing it would delay its planned delisting from Euronext Amsterdam.

Danish wind farm developer Oersted lost 6.2 percent after a profit warning.

Spanish telecom company Telefonica surged 9 percent after it reached an agreement to sell its towers division Telxius to U.S. infrastructure giant American Towers Corporation.

French energy company Total SA rose 2.2 percent. The company said it has signed a cooperation agreement with natural gas and electricity supplier Engie SA to design, develop, build and operate the Masshylia project.

Carrefour shares surged 8.5 percent after Alimentation Couche-Tard Inc., the convenience-store giant that owns the Circle K chain, said it's exploring a transaction with the French grocer. Retailer Casino advanced 3.8 percent.

Deutsche Post AG shares gained 2.4 percent. The German courier company reported that its fourth-quarter preliminary group EBIT was about 1.960 billion euros, up 56 percent from last year.

Wind turbine manufacturer Nordex Group added 2.5 percent. The company announced that it has received a major order for a 518.7 MW wind farm project from Statkraft in Brazil.

In economic news, the French economy contracted in the final quarter of 2020 despite easing of the Covid-19 containment measures in December, the Bank of France said.

The bank said the economy shrank 4 percent sequentially in the fourth quarter, taking the annual fall for the whole year of 2020 to 9 percent, unchanged from the previous estimate.

In the third quarter, GDP grew 18.7 percent sequentially after the lifting of the containment measures.

U.S. Economic Reports

Reflecting a spike in gasoline prices, the Labor Department released a report on Wednesday showing U.S. consumer prices increased in line with economist estimates in the month of December.

The report said the consumer price index rose by 0.4 percent in December after edging up by 0.2 percent in November. The price growth matched expectations.

The Labor Department said the advance by the consumer price index was driven by an 8.4 percent jump in gasoline prices, which accounted for more than 60 percent of the overall increase.

Excluding food and energy prices, the core consumer price index inched up by 0.1 percent in December after rising by 0.2 percent in November. The uptick in core prices also matched economist estimates.

At 9:30 am ET, St. Louis Federal Reserve President James Bullard is due to participate in moderated discussion on the U.S. economy and monetary policy before Reuters Next Virtual Forum Via Zoom.

The Energy Information Administration is due to release its report on oil inventories in the week ended January 8th at 10:30 am ET.

Crude oil inventories are expected to decrease by 2.3 million barrels after tumbling by 8.0 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $24 billion worth of thirty-year bonds.

Federal Reserve Governor Lael Brainard is also due to speak on "The Economic Outlook and Full Employment" before virtual event: Mike McCracken Lecture on Full Employment to the Canadian Association for Business Economics at 1 pm ET.

At 2 pm ET, the Federal Reserve is scheduled to release its Beige Book, a compilation of economic evidence from the twelve Fed districts.

Philadelphia Federal Reserve President Patrick Harker is also due to participate in an interview on the economy before virtual Chamber of Commerce for Greater Philadelphia “Economic Outlook '21” at 2 pm ET.

At 3 pm ET, Federal Reserve Vice Chair Richard Clarida is due to participate in a discussion on "The Federal Reserve's New Framework: Context and Consequences" before virtual Hoover Institution Monetary Policy Conference: The Road Ahead for Central Banks.