Markets Move Lower Ahead Of Powell Speech, Financials Drag In EU, Tech Continues Slide

Markets move lower across the globe as traders wait on remarks from Jerome Powell. Will the FOMC cut rates or not at the next meeting.
Thomas Hughes

The U.S. Futures Are Lower In Early Trading

The U.S. Futures indices are lower in early Tuesday trading while investors await testimony from Jerome Powell. The FOMC chief is scheduled to testify before the House Financial Services Committee on the outcome of the recent bank stress tests. Naturally, the market expects the committee to ask about the NFP report and its impact on FOMC outlook. The indices are down about -0.35%, trading close together and in tight ranges.

The NFP drastically altered the market’s perception of the Fed’s next move so anything he says to that effect will be market moving. The CME FedWatch Tool predicts a 100% chance for a single cut at the July meeting. The odds for two cuts had been quite high but have now fallen to near zero.

In stock news, Pepsico reported earnings this morning and beat expectations on the bottom line. The globally oriented beverage and snack-food company reported revenue is up 2.2% which was expected. The company reported non-GAAP EPS of 1.54 which is $0.03 or 1.9% above consensus. Shares are up in early trading about 0.5% on the news.

Banks Lead EU Markets Lower

The EU’s major indices are all lower in midday trading although the losses are mixed. The FTSE is hugging break-even levels with a loss near -0.10% while the CAC and DAX lead with losses of -0.45% and -1.05% respectively. The is sparked by yesterday’s tech-driven decline in the U.S. market and amplified by weakness in financials. Deutsche Bank is the cause.

The troubled lender is in the process of cutting 18,000 jobs at its locations worldwide and the scene is not pretty. Employees are leaving their buildings with all their belongings as if told to simply get out, now. Deutsche Bank today cut its forecast for annual revenue and EPS sending the stock down another -4.0%. Other banks in the region were also affected but their losses were trimmed to a mere -1.0%.

A warning from chemical giant BASF on the auto sector also took a toll on today’s market. The company warns it is going to miss EPS expectations by a wide margin due to weakness in autos. The entire sector was hit by the news, shares of BASF fell by -5.0%

Tech Leads Asia Lower

Most indices moved lower in Asia. The sole market to show a gain is the Nikkei and that a tepid 0.14%. The Hang Seng led the losses with a move of -0.76%, the South Korean Kospi posted the next largest loss of -0.55%. While Tech was weak throughout the region, markets were notably weaker in Japan and South Korea due to a trade impasse that does not appear easily resolved. The Shanghai Composite and Australian ASX shed -0.18% and -0.10%.

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