Equities Fall On Growth Concerns, Brexit Turmoil Rocks EU, Asia Mixed With US/China Trade In QuestionGrowth outlook, Brexit Chaos, and Trade fears weigh on global indices with no end to the turmoil in sight.
The U.S. Futures Fall After FOMC Policy Statement
The U.S. futures trading was indicating a negative open on Thursday. The move is caused by deteriorating growth outlook sparked by the FOMC. The FOMC held rates unchanged and lowered their inflation forecasts as expected. The problem for markets is the statement and policy were more dovish than the market was looking for.
The committee says the U.S. economy is solid and stable but global risks are hampering activity more than previously forecast. The committee now sees no rate-hikes in 2019 and only 1 in 2020. This is down from a possible 6 estimated just a few months ago.
In stock news, the banks were among the worst hit by the interest rate outlook. Financials are sensitive to interest rates because higher rates mean they can charge more for loans and make higher profits. Shares of Biogen were sharply lower in early trading after it announced the end of a key study of a potential therapy for Alzheimer’s Disease. Shares of Biogen fell more than -25%.
The tech-heavy NASDAQ 100 led the indices lower with a loss near -0.39%. The blue-chip Dow Jones Industrial was the next biggest loser at -.35% with the broad-market S&P 500 not far behind.
Brexit Chaos Rocks The EU
EU markets were mixed at midday on Thursday following the FOMC announcement, renewed trade uncertainties, and Brexit chaos. In Brexit news, Prime Minister Theresa May said she was on the side of the people in this process. In an address to the UK citizenry May firmly lays the blame for Brexit delay at the feet of Parliament.
May says, and rightly so, that the people of the UK are tired of political infighting and that it’s “high time” for Parliament to make a move. The deadline for Brexit is next Friday, there is no deal on the table and no reason for the EU to allow an extension. Surprisingly, the UK FTSE 100 was in the lead with a modest gain of 0.40% in midday trading. The German DAX was the biggest loser at -0.90% while the French CAC was holding closer to break even.
Asia Mixed, Trade Deal Uncertainties Come To The Fore
Asian markets were mixed in Thursday trading. While the FOMC policy statement was a plus for equities long-term the growth outlook and news on trade weighed on sentiment. Conflicting reports and statements from the White House have raised serious concerns about the state of the trade deal.
On one hand, representatives and President Donald Trump himself have said the talks are progressing well, on the other President Trump says tariffs on Chinese goods could remain in place for years. The news compounds fears that are driven by last week’s postponement of the Trump/Xi summit and word China is walking back some of its concessions. The Hong Kong Hang Seng was the biggest loser at -0.85% most other indices in the region closed with small gains. Equities markets in Japan were closed for a holiday.