A Wild Ride For Asia-Pacific Market, Brexit Deal Reached, US Rebound AdvancesEuropean markets were up on stronger than expected earnings. The US equities market was indicated to open higher on Thursday morning.
Asian Markets Close Mixed
The Asian markets kicked off the new month with a wild ride. Indices in Japan and Hong Kong both moved more than 1.0% in Thursday trading is in different directions. The Japanese Nikkei was weighed down by the tech sector which is suffering from earnings outlook while the Chinese market was supported by better than expected manufacturing data.
On the earnings front, shares of conglomerate Softbank fell more than -8.0% on news one of its rivals was lowering fees while Panasonic shed more than 5.5%. On the economic front, the Caixin PMI came in at 50.1 versus the expected 49.9 and is a dubious sign of expansion within China’s economy.
Other indices in the region were mixed but closed closer to break-even than the Nikkei or Heng Seng. The Shang Hai Composite and Australian ASX both advanced about 0.15% while the Korean Kospi fell -0.26%.
Europe Up On Earnings, Brexit Deal Reach
European markets were up on stronger than expected earnings. The move was led by Germany which saw its DAX index up more than 0.60% at mid-day. The Telecom sector was today’s star after BT reported better than expected revenue and EPS and raised its full-year guidance. Shares of that stock rose more than 10%. Other indices in the region were positive, but gains were less robust than in Germany. The FTSE 100 was trading about 0.12% higher at midday followed by a 0.06% increase for the French CAC.
The UK market was hampered in part by news on two fronts. On the one side word from Brussels is the UK and EU have reached a deal-in-part for the Brexit. The deal covers the financial services sector, sector that has been one of the major sticking points for negotiators to date. The news helped smooth the way for a broader agreement and relieved some fear inspired by Mario Draghi when he commented to the effect no Brexit deal is a de facto hard Brexit.
The second news hampering markets in the UK is the BOE decision. The BOE decided to hold rates unchanged but lowered their growth and inflation targets. The BOE had been on track to hike rates over the next year, and now that is in question. The British Pound and EU Euro both surged on the news, advancing more than 1.0% versus the dollar, with little impact from the BOE decision seen in the price action.
US Equities Quietly Rebounding
The US equities market was indicated to open higher on Thursday morning, supported by robust earnings from DowDupont and Cigna. Both companies reported better than expected and provided positive outlook which sent shares higher in premarket trading. The Dow Jones Industrial Average was leading the market in the early hours, up roughly 0.40% at 8:30 AM, and followed closely by the broad market S&P 500 and tech-heavy NASDAQ Composite.
Traders will continue to eye earnings as there are several important releases due out after the bell including Apple, Starbucks, and US Steel. On the economic front, traders have their eye on Friday’s labor data which includes the all-important NFP, unemployment rate, and average hourly earnings. Average hourly earnings and wage inflation will be the most important data point. Wage inflation has been running a hot 2.9% YOY and may lead the FOMC to hike rates faster than expected.