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Anxious Markets Await Trade Deal Signing, Futures Are Flat, U.S. Data Surprises

Global markets are mixed as traders wait for the Phase One deal signing. The details so far suggest the Phase One deal is far less than the market was expecting.
Thomas Hughes
President Trump Signs Orders

The U.S. Futures Are Trading Flat In Early Action

The U.S. futures are indicating a flat open on Wednesday as traders await the much-anticipated Phase One Trade Deal. Chinese delegates are in Washington now and expected to sign the deal later today. The market could sell-off in the wake of the signing due to a new reality; the Phase One deal is far less than the market was expecting.

According to various sources, tariffs will not be removed with this deal. Mnuchin says the deal is enforceable, once China proves it will abide Phase Two can begin. The Phase Two deal will remove tariffs; until then China’s economy is burdened by the current load.

The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all hovering near break-even in early trading. Shares of Target, however, are down more than -8.0% after the company reported weak holiday sales growth. Target says holiday sales rose a mere 1.4% in 2019, the consensus for 4th quarter results is +3.8%.

In economic news, Empire State Manufacturing came in better than expected. The survey index accelerated to 4.8 versus the expected 3.6. While tepid, this is the highest level since early spring 2019. On the inflation front, PPI came in at 0.1% higher than last month versus the 0.2% expected.

European Markets Are Mixed At Midday

The European markets are mixed at midday as traders wait on the Phase One deal signing. Likely an underwhelming event, there is a risk the market could begin to sell off once the deal is signed. The DAX and CAC are both down about -0.15% while the FTSE is up a similar amount. Autos are the biggest loser’s on the day, down -1.25% while healthcare stocks lead advancing issues.

In Germany, GDP came in at 0.6% for the last quarter of 2019, the slowest rate in 6 years. Even so, it is far above the negative number analysts expected early this year. Looking forward, the German export economy faces headwinds related to trade conditions the Phase One deal may not alleviate. In the UK, inflation rose only 1.3% versus 1.5% expected. The pound edged lower after the news was released.

Asia Moves Lower, Australia Bucks Trend

Asian indices are mostly lower at the end of the day on Wednesday. The Nikkei, Shanghai, Hang Seng, and Kospi are all down -0.35% to -0.55%. The Australian ASX is the only to move higher, it advanced 0.47%. All eyes are on the Phase One deal signing. Although it is not expected to satisfy expectations it will set the stage for the coming year.

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