Markets Mixed After State Of Union Address, Earnings Still In Focus, Good News On Trade

European indices were higher in the earliest portion of the session but gave up those gains by midday. In earnings news, shares of GM spiked in early trading after it reported much better than expected earnings.
Thomas Hughes
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Asian Markets Were Flat After Trump Speech

Markets in Asia were mostly higher in the wake of Donald Trump’s second State of the Union Address. In the speech, he said a trade deal was likely and that is good news. Sentiment in China edged higher on the news but the markets are still closed for the Lunar New Year Holiday.

Australian shares were largely higher although the action was mixed. The benchmark ASX advanced 0.34% but had been higher intraday. The move was driven on generally positive sentiment but was weighed down by profit-taking in the banking sector. On Monday, Australian banks saw high single-digit gains on a double-shot of good news including the conclusion to a government inquiry into the sector. The inquiry did not find it necessary to break up any of Australia’s largest banks but it did result in some charges filed against individuals and institutions.

European Indices Are Mixed As Earnings Roll In

European indices were higher in the earliest portion of the session but gave up those gains by midday. The German DAX led the reversal posting a loss near -0.50%, the CAC was down about half that amount, and the UK FTSE was closer to -0.10%. At the sector level, tech and banks led advancing issues with gains near 1.0%.

The biggest loser in today’s session is the online supermarket pioneer Ocado. A fire at its key robotic distribution center badly damaged the complex and will impact operations over the foreseeable futures.

Shares of CYBG, owner of Clydesdale and Yorkshire Banks, reported an unexpected increase in year-over-year lending. The bank says there is still demand in the UK’s housing sector despite Brexit uncertainty and strong competition. Shares of the stock surged nearly 15%. Industrial technology giant Hexagon also reported better than expected earnings driving its shares up nearly 10%. Hexagon execs say they are optimistic about China despite its slowing economy and trade fears.

Trade News Lifts Futures In The US

US futures were trading flat and mixed in the early pre-market Wednesday session until good news on trade hit the market. The news is this, Secretary of the Treasury Steve Mnuchin says the trade talks have been very productive and confirmed he is traveling to Beijing next week. The news reinforces the positive message delivered by Trump and Xi last week and points to accelerating momentum in the negotiation.

In earnings news, shares of GM spiked in early trading after it reported much better than expected earnings. The world’s largest automaker says revenue came in at $38.4 billion, $2 billion above consensus, and EPS was $1.43 which beat by $0.20 or 16.5%. The strength is due to pricing, mix, increased business at GM Financing, and cost controls so is expected to continue in 2019. Shares moved up more than 4.0% on the news.

On the economic front, a host of reports were scheduled for this morning but most were delayed by the government shutdown. The data that was released is the Export/Import data and trade balance. The data is rear-looking, for November, but shows a marked improvement in the US trade balance. The news is good and unexpected but had little impact on the dollar.

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