Markets Pause As Trade Hopes Fade, EU Leadership In Question, RBA Slashes Interest Rates

The U.S. Futures Are Flat In Early Tuesday Trading

The U.S. futures are flat and slightly lower in early Tuesday trading. The pause comes just a day after the broad-market surged to a new all-time high. The high was sparked by a so-called trade-truce between the U.S. and China that did little to assuage market fears. Donald Trump says the new round of trade talks has already started, traders are warned not to expect too much too soon. Trump also said any deal would have to skew in favor of Washington, a sentiment that does not bode well for bipartisan cooperation.

Adding to the negative trade-vibe is the word the Trump administration is considering another round of tariffs on EU goods. The new round of levies would be aimed at up to $4 billion worth of goods and is intended to battle EU subsidies for aircraft manufacturers. The U.S. and EU have been locked in a fierce battle at the WTO over the EU’s subsidies for Boeing rival Airbus. The U.S. tariffs would affect goods ranging from olives to Italian cheeses and Scotch whiskey.

In other news, OPEC says the non-OPEC members of OPEC+ have agreed to extend production cuts for another 9 months. The production cuts are intended to tighten the global oil market and drive prices higher. The policy is designed to fight rising U.S. production which has eclipsed that of Saudi Arabia and Russia. There is no economic data today, later this week be on the lookout for the ADP and NFP jobs reports.

EU Markets Are Mixed, EU Leadership Is In Question

The EU indices are mixed in early trading as trade hopes, the threat of new tariffs, and uncertainty over future EU leadership grip the market.  The UK FTSE 100 is in the lead at midday with a gain of 0.50%. The move is contrary to today’s data which shows UK construction PMI posted its sharpest contraction in years. The downturn in activity is directly linked to the Brexit situation and likely not to change in the near-term.

In politics, leaders from all 28 EU member nations are locked in the third day of talks trying to decide who will lead the EU next year. EU President Paul Juncker is slated to step down soon with no replacement in sight. In stock news, shares of Galapagos NV soared nearly 7.0% after its U.S. counterpart Gilead announced it would re-submit applications for key drugs to the FDA.

The RBA Cuts Rates, Will Likely Cut Rates Again

Asian markets were mixed in the wake of Wall Street’s big move on Monday. The Hang Seng led advancing issues with a gain of 1.17% as it reopens from holiday. The Nikkei and Australian ASX were the only other indices to post gains and those less than 0.10%. In Australia, equities were supported by the RBA’s decision to cut rates by 25 bps. The move is meant to assist faster progress toward the RBA’s inflation target by easing access to capital markets. The Shanghai Composite and Korean Kospi both posted small losses.