Fed Minutes Not So Dovish, Scandal Rocks EU, The Trade Deal Is Coming Into Focus

Cautious markets are hopeful a trade deal will be reached soon after sketchy details of possible documents are released to the media.
Thomas Hughes
Dow Jones Index

Asian Markets Are Mixed Following FOMC Minutes

Asian markets were mixed on Thursday following the release of the FOMC’s meeting minutes. The minutes were more and less than what the market expected in that the end of QT is in sight but rate hikes are still on the table. The FOMC, in their discussion, highlighted the mounting risk to global and US economics that can all be traced back to heightened trade tensions between the US and China.

The Australian ASX advanced the most, aided by a 1-2% increase in the Big Banks, posting a gain of 0.70%. The Hong Kong Hang Seng closed with a gain of 0.41% and was supported in the final hours by Lenovo. Lenovo, the world’s largest manufacturer of PCs, reported earnings blowing past expectations. The company has returned to profit sooner than expected and says that profit is sustainable. The company suffered from a one-off tax-hit related to US tax reform that will not impact results in future quarters.

Korean equities were less buoyant despite the release of Samsung’s new phone. Shares of Samsung closed with a gain of only 0.10% while the greater Kospi posted a small loss. The Shang Hai Composite closed with the largest decline but that was only -0.34%.

Europe Rocked By Scandal, Again

EU markets were weighed down by a new scandal in European banking. The latest allegations involve Swedbank and Danske Bank and dubbed serious by regulators. The charges involve cross-border money-laundering and could result in jail time for guilty parties.

The FTSE 100 was showing the most loss at midday, down about -0.75%, as Brexit Angst and weaker than expected PMI readings create another drag on sentiment. The pan-European Markit Flash Manufacturing PMI fell more than expected and into contractionary territory as businesses cut back on activity due to US/China trade relations.

Countering that, Services and other business were strong enough to more than offset the weakness in manufacturing. The Composite PMI rose 3.4 points to 51.4 which shows a net increase in EU economic activity. The DAX was trading slightly higher at midday while the CAC was slightly lower.

A Trade Deal Comes Into Focus

The major US equity indices were trading flat in the early premarket session. The S&P 500 was in the lead with a meager advance, about -0.17%, while the Dow Jones Industrials and NASDAQ Composite were both down about -0.10%. The move is in the wake of yesterday’s FOMC minutes, minutes that show a Fed ready to pounce should business activity reaccelerate, but still supported by trade-related news.

The latest reports say that US and Chinese negotiators are working on documents that would essentially end the trade war. The packet includes six memorandum outlining structural issues and the path to their resolution. The deal also includes a list of ten items China would begin buying from the US among other concessions from both sides.

Today’s economic data is mixed. The initial claims data shows joblessness decreased more than expected, net positive for the dollar, but Durable Goods was only 1.2% and the Philly Fed MBOS fell into negative territory. The data is yet another indication global and US economies are slowing, confirmation US/China trade tensions are hurting both countries.

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