China Down After Record Stimulus, UK Moves To Brexit Plan B, Earnings Drag US Futures Lower

A weak earnings report from Morgan Stanley had US futures down about -0.35% in the early pre-market session. The UK FTSE 100 was the biggest loser in early Thursday trading, down more than -0.80% at midday. In Asia, the Hang Seng led the losses as traders and investors take advantage of the liquidity event.
Thomas Hughes
Stock Market Graph

Asian Markets Were Mixed Following A Record-Breaking Cash-Injection

The People’s Bank of China injected 560 billion yuan into the Chinese economy. The injection, about $83 billion, is the largest one-day cash stimulus on record and intended to offset slowing in China’s economy. The move adds additional liquidity to markets on the cusp of a major holiday season, the Chinese Lunar New Year, a time in which regional markets will be closed.

The Hang Seng led the losses as traders and investors take advantage of the liquidity event. The Hong Kong-based index fell a little more than -0.50% on the news, not much considering recent market volatility, while the Shanghai Composite fell about -0.40%. The Japanese Nikkei was also lower in Thursday trading but losses were minimal; the Australian ASX and Korean Kospi were able to post small gains.

May Survives Confidence Vote, UK Moves On To Plan “B”

Theresa May narrowly won a vote of confidence on Wednesday that prevented a general election and the possibility of hard-Brexit. The UK Parliament now has until Monday to come up with a Plan “B” that many expect to include a request to extend the deadline set by Article 50. Article 50 is the clause in the EU charter which allows for member nations to leave the union. Along with the extension, there is the possibility of another referendum on Brexit that could lead the island nation to remain within the EU.

Most EU markets were down in the wake of the vote, pressured lowered by political uncertainty and some weak earnings from the financial sector. French super-bank Societe Generale warned that 4th quarter results were negatively impacted by tough market conditions and sent shares of its stock down more than -1.0% by midday.

The UK FTSE 100 was the biggest loser in early Thursday trading, down more than -0.80% at midday.  The French CAC was not far behind with a loss of -0.60% while the German DAX was down only -0.4%. On the economic front, final EU inflation data for December show headline consumer-level inflation slowed to 1.6% YOY, as expected. At the core level, CPI is trending at only 1.0% which raises doubts about the ECB’s plan to hike rates later this year.

Weak Earnings Drag US Equity Futures Lower

A weak earnings report from Morgan Stanley had US futures down about -0.35% in the early pre-market session. Morgan Stanley missed on the top and bottom lines after a quarter of weak trading and wealth management results. The news was a shock despite evidence earlier in the week trading revenue, and specifically, fixed-income were going to be bad.

Results from other leading financial institutions like Citigroup and Wells Fargo were the same, the difference is Morgan Stanley is exclusively an investment bank with little tie to consumer business. Shares of Morgan Stanley fell nearly -5.0% in the pre-market session. American Express reports after the bell and is expected to report strongly on the back of consumer health.

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