Equities Mixed After Monday Rally, Brexit Deadlocked Unbroken, RBA Holds Rates Steady

Equities mixed following Monday’s rally; data, trade talks, and Brexit in focus.
Thomas Hughes

The U.S. Futures Are Mixed In Early Trading

The U.S. futures are indicating a flat to a slightly higher open in early Tuesday trading. The move comes just a day after indices advanced more than 1.15% on positive manufacturing data. The data, manufacturing PMI from the U.S. and China, was positive and better than expected showing resilience in the global economy. The data was offset by weaker than expected U.S. retail sales and PMI from Europe but enough to alleviate fears of global economic recession.

In stock news, shares of Wallgreen’s-Boots Alliance fell more than -8.0% in early trading. The national-brand drugstore/pharmacy reported weaker than expected earnings and reduced its full-year forecast. Shares of Lyft fell another -5.0% in early premarket trading and extended their post-IPO decline. The stocks inability to find support is a warning sign to upcoming IPOs.

In economic news, U.S. Durable Goods Orders are weaker than expected. The headline durable goods orders figure was reported as -1.6%, slightly better than the expected -2.0%, but overall a negative for the market. The previous month was revised lower by -0.2% which points to weaker than expected GDP impact. Core CapEx spending fell -0.1% versus an expected gain of 0.1%.

 EU Market Moves Higher Despite Brexit Deadlock

The EU equities markets are moving higher at midday despite deadlock in the UK Parliament. Parliament voted on a number of measures in the overnight session and failed to reach consensus on any of them. There is now just ten days until the next Brexit Deadline, it looks more and more likely a hard-Brexit is inevitable. Without an agreement among the MPs, or consensus on Theresa May’s deal, there is no other path available.

The UK FTSE 100 was in the lead with a surprising gain of 1.0%. I say surprisingly because Brexit Deadlock was compounded by weak data. The UK construction PMI figures came in below expectation and in contractionary territory. This is the second month of contraction and points to further slowing in the UK construction economy.

Data from the EU was likewise weak, all-EU PPI rose a tenth from the previous month but is a tenth shy of expectations. The German DAX is the second strongest advancer at 0.60% while the French CAC is just behind with a gain of 0.50%.

Asia Moves Higher, Sentiment Muted After RBA Announcement

Asian equities moved broadly higher following Monday’s round of economic data. The Japanese Nikkei is the only index to post a loss and that was only -0.02%. Australia led with a gain near 0.40% after it was bolstered by the RBA. The Reserve Bank of Australia kept its interest rates unchanged, as expected, and issued positive, if tepid, outlook for growth.

The RBA said low rates are supporting economic activity. Australia’s labor market is strong, and that inflation will continue to creep higher until hitting the banks target. Financials and energy led gains in the region with advances of 0.45% and 0.90% respectively. Chinese indices in Hong Kong and on the mainland rose about 0.20%. The Korean Kospi advances about 0.40%.

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