China Cracking Down On Australia, Trade Hopes Lift Stocks, The Worst May Not Be Over For Equity Markets

China Bans Coal From Australia

Shares of Australia’s coal miners took a hit on news China banned coal imports from Australia. The ban affects so far only one of the northern ports but worth about 2% of Australia’s export volume. The move is in retaliation of Australia’s treatment of Huawei earlier this year and closely related to US/China trade issues. Despite the weakness in the mining sector, most shares in Australia were able to post gains, the ASX closed up 0.46%.

Chinese markets led the advance on growing hopes a trade deal in principle would soon be reached. Thursday’s news that draft memoranda were in progress outlining a commitment to principles is the reason. That, along with a high-level meeting in Washington, helped the Shanghai Composite advance 1.91%.

The Hong Kong Heng Seng was also higher but a more modest 0.65%. The Korean Kospi was closer to flat, up only 0.08%, while the Japanese Nikkei fell -0.18%. Japanese sentiment was weighed down by bad results from chain-store retailer Family Mart. The company miss expectations sending shares down nearly -1.0%.

Trade Hopes Lift Stocks In Europe, Confidence Falls

Major equity indices were higher across the board in the early EU session. The UK FTSE 100 was in the lead at midday with a gain over 0.60% and closely followed by the German DAX and French CAC. Basic resources were in the lead, they have extensive exposure to China, and may extend their gains as the US/China trade deal develops. With one week to go until the March 1st deadline hopes are high talks will progress enough for Trump to postpone or cancel the next round of tariffs.

Today’s data is another reminder of the effect of global trade on the economy. Business Confidence in the EU fell much more than expected in the last month and now at 4 year low. The gauge of Business Confidence has been in decline for six months as trade tensions escalated and the effects of tariffs set in, now that negotiations are on the upswing that may change.

The Hardest Part Is Still To Come…

US futures indicated a positive open in early Friday trading as hopes rise a trade is close to hand. The major US indices were looking at gains in the range of 0.35% to 0.45% at the open with traders looking forward to today’s big meeting. Chinese Vice Premier Liu He is slated to meet with President Trump as both sides prepare for the final confrontation. Now that negotiations have reached the point core issues are stake the risks negotiations will fail are intensified.

There were no economic reports in today’s news and earnings season is all but over. About 90% of the S&P 500 has reported for the 4th quarter with only a few names of note left on the schedule. Today’s earnings news includes Cabot Oil & Gas. The company says revenue grew 78.9% over the past year and beat consensus estimates. Shares of the stock held steady in pre-market trading however as EPS fell short of estimates.