Markets Pause, Geopolitical Tensions Flare, Uncertainty May Cap Index Gains Next Week

Global markets pause as geopolitical tensions flare, the S&P 500 is sitting at a new all-time high but may not move much higher.
Thomas Hughes
List of stock market indices

The U.S. Futures Are Slightly Lower On Friday

The U.S. futures are pointing to a flat to a slightly lower open for the market on Friday. The pause comes a day after the broad-market S&P 500 surged 1.0% to set a new all-time high. The market is in rally-mode following a more-dovish than expected policy statement from the FOMC. The FOMC sees mounting global risks dragging on U.S. economic data and hinted at an interest rate cut as soon as next month. The CME Fed Watch Tool is showing a 100% chance of cut next month and a near 85% chance of three cuts by the end of the year.

Geopolitical tensions and uncertainty are at the heart of today’s market pause. News that President Trump had ordered, then canceled, a strike against Iran raised fears an incident will soon follow. Iran attacked and shot down a U.S. drone on Thursday and is accused of firing upon internationally flagged tankers last week.

In economic news, traders will be looking for flash-PMI readings on the manufacturing and services sector at 9:45 AM. Both are expected to show some slowing within the economy. In stock news, Canopy Growth Corporation reported better than expected revenue as pot surge in Canada. The company also reported a larger than expected loss as aggressive growth tactics eat into cash flow.

European Markets Are Mixed At Midday

The European indices are flat and mixed at midday as traders weigh geopolitical concerns versus the earnings outlook. Iran is the focus of the day but the Brexit, weakening data, central bank activity, trade tensions, and the upcoming G-20 meeting all weigh on sentiment. The FTSE led with an advance of 0.10% while the DAX and CAC are both showing losses near -0.05%.

The semiconductors are in the lead, down more than -1.0% across the board, after a revenue warning from IQE. IQE makes silicon wafers for semiconductors and is part of the Apple supply chain. The company says revenue will be weaker than expected because of the Huawei situation and trade tensions between China and the U.S. In other news, Lundin Petroleum gained 5% on the back of rising oil prices. Netaxix fell -6% after Morningstar announced a review of a company-owned business.

Geopolitical Uncertainty Caps Gains In Asia

Asian markets were mostly lower in Friday trading as geopolitical uncertainty caps gains. The Shanghai Composite is the only major index to show a net gain and that 0.50%. The Japanese Nikkei led the losers with a decline of -0.95%, the Hong Kong Hang Seng fell -0.27% despite a -1.0% fall in HSBC. The Australian ASX closed with a loss of -0.55%, the Korean Kospi -0.27%.

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