China Leads World Equities Higher, ECB Ends QE, US Flat As Traders Weigh Trade DevelopmentsEU markets were flat and mixed in early trading, both before and after the release of the ECB’s policy statement. In the US futures trading indicated a flat open for the major indices.
Asia Moves Higher, Led By China, As Trade Tensions Thaw
Asian markets moved higher on Thursday as thawing trade tensions support indices around the world. A series of new developments began earlier this week that point to a concrete effort from within China’s ruling party to ease relations with the US and pave the way for a longer lasting trade deal. The most important of these developments is the possible end to China’s “Made In China 2025” agenda, a program intended to cement China’s dominance as a manufacturing powerhouse.
According to reports from the Wall Street Journal sources close to the top have indicated the “Made in China 2025” push will be toned down and new avenues for foreign investment in China will be opened. According to some market participants, this could be the most important development in trade to-date as it would do far more for the global economy than lowering tariffs on autos or China buying more US agricultural products.
The greater China region led the Asian equities markets with gains near 1.25% for both the Heng Seng and Shang Hai Composite. The Japanese Nikkei was close behind with a gain near 1.0% while the Korean Kospi and Australian ASX lagged with gains closer to 0.60% and 0.14% respectively.
EU Markets Mixed, ECB In Focus
EU markets were flat and mixed in early trading, both before and after the release of the ECB’s policy statement. The EU’s central bank, led by Mario Draghi, says that it will end its long-running QE program as expected. This means the bank will reduce its bond purchases from 15 billion euros monthly to zero starting at the end of December. The bank will continue to reinvest proceeds from prior bond purchases as needed and remains ready to support economic growth if conditions should deteriorate.
The EUR/USD was volatile in the wake of the news first surging on what appears to be a hawkish move from the ECB and then quickly reversing as traders turn their eye toward the FOMC. The FOMC is meeting next week and largely expected to raise rates, a move that is expected to keep the dollar supported.
US Futures Flat As Traders Weigh Trade Developments
In the US futures trading indicated a flat open for the major indices. The news is no surprise following this weeks volatility and maybe sign calm is returning to nervous markets. In business news, GE received a much-needed upgrade from JP Morgan on perceived benefits from turn-around efforts. The upgrade, to neutral from underweight, may indicate the bottom in the stock is near.
Today’s action is likely to be light, without new catalysts to move indices traders will be focused on Friday’s retail sales figures and next week’s FOMC meeting. The retail sales figures are expected to moderate from last month’s big gains but remain positive, the FOMC is expected to raise rates next and also indicate a data-driven slow-down in the rate-hiking timeline.