Global Markets Are Mixed, The FOMC Did Not Meet Expectation, China Manufacturing Data Contracts Again

Global markets are mixed as traders react to Wednesday’s surprise FOMC comments.
Thomas Hughes

The U.S. Futures Are Flat In Early Trading

The U.S. market tried to rebound from yesterday’s plunge but the gains did not hold. Shortly after the release of weekly jobless claims figures the market retreat to break even where it is currently hovering. Jobless claims rose slightly over the last week but fell short of consensus by 1,000. The total number of claims fell slightly but remains near its recent peak. The data shows stability if not strength within the U.S. labor market and underscores comments from Jerome Powell and the FOMC.

The FOMC cut rates on Wednesday which was widely expected. What the FOMC did not do was make an aggressive cut, and they poured cold water on hopes for future cuts this year. Powell says the committee stands ready to act appropriately to sustain the economy but additional rate cuts are not a certainty. Underlying U.S. economic activity remains stable and expansionary although the pace of activity has slowed. The single-cut enacted this meeting may be enough to stimulate economic acceleration.

In earnings news, General Motors reported before the open and beat consensus expectations for top and bottom-line performance. The company says strength in North American markets helped drive results, shares moved up more than 3.0% on the news. Yum! Brands was also moving sharply higher in early trading. A fast-food operator, Yum! says strong comps and improving margins drove better than expected revenue and EPS. The results allowed the company to raise guidance and that helped shares move up more than 3.0%.

The Bank Of England Held Rates Steady

The Bank of England’s policy statement was largely as expected. In the statement, the Bank held rates steady and lowered its outlook for future economic growth. What was not expected was the void of information concerning future rate cuts, something the market was hoping for. The UK FTSE 100 shed about -0.25% on the news and was the worst reaction by far, the DAX and CAC are both moving higher at midday, the DAX by 0.25% and the CAC by 0.45%.

The financials led in today’s market following the FOMC and BOE decisions. The prospect of, not higher interest rates but less-lower than expected rates, has the group moving higher on improved earnings outlook. Additionally, results from Societe Generale, Barclay’s, and ING Group are all better than expected. Societe Generale and Barclay’s saw their shares advance 4.0% and 2.0%. ING Group moved lower on poor guidance and a warning low rates would hurt long-term profitability.

Asia Moves Lower

Asia moved broadly lower in the wake of the FOMC decision. Weak manufacturing data helped drive the Shanghai Composite and Hang Seng to the bottom of the rankings. The Caixin PMI came in at 49.9 which is better than expected, the bad news is that it confirms the third month of contraction within China’s economy. The Shanghai market fell -0.81% and Hong Kong fell -0.76% while Australia and Korea both fell about -0.35%. Japan was the only index to post a gain and that a small 0.09%.

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