Growth Fears Compounded By Weak Data, Brexit Delay Granted, Xi Jinping Goes To ItalyGrowth fears weigh on equities as weak data and trade worry compounds negative sentiment.
Futures Lower After Weak Data
The U.S. futures were indicating a lower open on Friday. The moves come after a round of weak data from the EU. The EU Market Flash Composite PMI came in at only 51.3. This is down from the previous 51.9 and well below the expected 52.00. The data is yet another piece of evidence the world economy is slowing under the weight of U.S. trade policy. The Dow Jones Industrial Average was in the lead in early trading with a loss near -0.55% followed by a -0.45% drop in the S&P 500 and a -0.35% decline in the NASDAQ. The U.S. flash PMI reading is due out at 9:45 and will be followed by Existing Home Sales at 10:00 AM.
In corporate news shares of Nike fell more than -4.2% because earnings were not in line with outlook. The company beat on the top and bottom lines but sales in the U.S. were less than expected.
Today’s action will be affected by trade because next week Secretary of State Steve Mnuchin and Trade Ambassador Robert Lighthizer will be traveling to Beijing. This will be the third round of high-level trade talks and could result in market-moving news. If successful, Chinese Vice Premier Liu He is scheduled to visit Washington, D.C in early April.
Brexit Delay Granted, German Bund Yields Turn Negative
The ten-year German Bund yield turned negative for the first time in nearly 3 years. The cause is weaker than expected PMI in Germany showing the third month of contraction. This month’s data puts German manufacturing at a 6-year low and raises questions about ECB policy moving forward. With PMI slowing across the EU Economic Arena the ECB may be forced to increase and accelerate its most recent round of quantitative easing.
In Brexit news, the EU has agreed to extend the Article 50 deadline. This is good news for the UK but not an end to the Brexit drama. The EU’s extension is dependent on whether the UK Parliament votes to accept May’s deal next week or not. The deal is still not well-loved by most MPs but the only option other than a hard-Brexit. May says she’s confident the UK will leave the EU. The UK FTSE 100 led EU markets lower with a loss near -1.40% at midday. The French CAC was in second place with a decline near -1.25%. The German DAX was also lower but posting a less robust -0.75%.
Asia Flat, Xi Jinping Goes To Italy
Asian indices were mostly flat in Friday trading as investors wrestle with the implication of slowing global growth. The Nikkei, Shanghai Composite, and Korean Kospi all closed with a small gain, 0.09%. The Hong Kong Hang Seng advanced a slightly stronger 0.14% while the Australian ASX led markets with a gain near 0.45%.
In Hong Kong, stocks were supported by Tencent. The Chinese-based multi-national conglomerate says revenue fell to a multi-year low but was well above expectation. Shares advanced 0.55% on the news. In Japan, Shares of Softbank and Fanuc led with gains of 2.75% and 1.40% respectively. In Korea, shares of SK Hynix led with a gain of 1.53% extending a rally sparked by Micron on Wednesday.
Chinese President Xi Jinping is headed to Italy to sign agreements with the new government. Italy has agreed to back China’s Belt and Road infrastructure project despite opposition from the EU and U.S.