China Inflation Data Weaker Than Expected, ECB Says Risk To The Downside, US Equities Lower In Early Trading

Chinese markets were mixed on the news. The EU equities markets were down on the news in midday trading but the losses were minimal. US equities were trading lower in the early pre-market session but the losses were small and indices were able to move up off of the lows as the opening bell approached.
Thomas Hughes
Trader

Asian Markets Were Mixed On Weak Inflation Data From China

Inflation in the world’s second-largest economy confirm economic activity and upward pressures on prices are slowing faster than expected. The official Chinese CPI came in at just 1.9% versus the expected decline to 2.1% as trade-uncertainty keeps spending in check. The real weakness was in PPI, the producer level inflation, which came in at a tepid 0.7% versus the expected 1.6%.

Chinese markets were mixed on the news, the Shanghai Composite falling -0.36% and the Heng Seng advancing 0.22%. Japanese stocks fell an average -1.29% as indicated by the Nikkei while Korea fell a mere -0.07% and Australia posted small gains.

News from both the US and China suggests that real progress has been made on the trade front. The Chinese Foreign Ministry says there were extensive talks on structural reforms, forced tech-transfers, and opening China’s markets to foreign investment. Pundits agree that momentum is building and that a comprehensive trade agreement could be reached very soon. The 90-day deadline is fast approaching if there is not an agreement the Trump administration could hike tariffs o $200 billion of Chinese goods to 25%.

ECB Says Economic Risk Is To The Downside

The ECB minutes were released this morning and helped push the EUR/USD to new near-term highs. The bank says that economic risks are to the downside but the release did little to alter the long-range outlook for policy tightening. With the FOMC turning dovish on the pace of rates hikes it seems likely the EUR/USD will continue its upward movement over the next few weeks.

The EU equities markets were down on the news in midday trading but the losses were minimal. The French CAC led with a decline of -0.55% but the DAX and FTSE were showing losses less than -0.10%, buoyed by trade-related optimism and the declining trajectory of FOMC rate hikes.

In local politics the UK Parliament has just set a timeline for Brexit plans should the vote next week fail to ratify the Theresa May Brexit Agreement. The Parliament says the government will have three days to come up with a new plan or risk hard-Brexit, among other possibilities.

US Equities Were Lower In Early Premarket Trading

The US equities market was trading lower in the early pre-market session but the losses were small and indices were able to move up off of the lows as the opening bell approached. 

The news of the day is weaker than expected holiday sales from a number of top retailers. Macy’s was the worst hit with a premarket loss greater than -18% on weaker than expected sales and lower full-year guidance. Shares of Kohl’s were also lower for similar reasons although the pain was not felt throughout the sector. Target reported better than expected same-store sales in the month of December and reiterated its previous guidance but shares still fell more than -4.0%.

On the economic front, Initial Jobless Claims fell more than expected and are just above the long-term low. This data is short-term in nature but is supportive of healthy labor markets and consumer spending over the long-term. Traders will now turn their eye to the government shut-down which is about to become the longest in US history, and to next week’s start to earnings season.

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