Asian Markets Rise On Earnings Expectations, Brexit Vote Weighs On EU, US Equities Volatile In Early Trading

The major indices were indicated to open higher to start but quickly gave up those gains after the release of earnings from JP Morgan. In the EU markets were cautious on the expectation the UK Parliament would not accept Theresa May’s contentious Brexit deal.
Thomas Hughes
JPMorgan

Asian Markets Rise On Earnings, Brexit Outlook

Asian equity markets rose broadly in Tuesday trading as participants await on earnings from the US, key data, and a Brexit vote that is largely expected to fail. The Chinese markets led the advance with gains of 1.36% in Shanghai and 2.02% in Hong Kong.

Citigroup had reported earnings on Monday with mixed results driven by weakness in trading-related revenue. The report was taken with a grain of salt, core business was robust, and shares were able to move substantially higher by the close of the trading session. Today’s news includes reports from JP Morgan and Wells Fargo which are expected to echo that of Citigroup.

The UK Parliament Brexit Vote Weighs On EU Equity Markets

In the EU markets were cautious on the expectation the UK Parliament would not accept Theresa May’s contentious Brexit deal. The vote is scheduled for 2PM ET and could spark major moves within equity and currency markets despite the expected outcome. If no deal is reached the UK could face hard-Brexit and risk destabilizing the entire region.

On the economic front data from Germany confirms GDP growth is slowing in the EU’s strongest economy. The 4th quarter GDP read came in at 1.5%, down from 2.2% in the previous quarter, and the slowest rate in five years. The mitigating factor is the data is as expected. Conversely, the EU trade balance expanded more than 35% in the last month versus an expected contraction. The data shows demand for EU goods that is likely caused by the US/China trade impasse.

EU equity indices were up in the earliest portion of Tuesday’s session but gave up those gains by midday. At midday the German DAX was leading the declining markets with a loss near -0.25% while the French CAC and UK FTSE were both trading with gains near 0.05%.

US Equities Volatile On Earnings And Data

US Equities markets were a bit volatile in the early pre-market session. The major indices were indicated to open higher to start but quickly gave up those gains after the release of earnings from JP Morgan. JP Morgan reported a miss on both the top and bottom lines that was driven by weakness in trading revenue. While bad, the news was mitigated by strength in core business and the outlook for 2019 core business.

Results from Wells Fargo were a bit better. Wells Fargo reported a top and bottom line beat of earnings expectations that helped the equity markets regain their footing before the opening bell.

PPI news, released at 8:30 AM, came in cooler than expected. The data, -0.10% headline and -0.10% core, shows a contraction of inflationary pressures that increase the odds the FOMC will not hike rates this year. The Dollar Index had been higher in early trading but retreat to break-even after the inflation data.

There is a slew of economic reports due this week but most will be delayed by the government shutdown. The shutdown is now in its fourth week and experts have begun to estimate its impact on US GDP. Jamie Dimon of JP Morgan says GDP for the first quarter could be reduced to zero if the shutdown does not end soon.

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