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Markets Rebound, Tensions Ease, Brexit Drama Resurfaces

Global markets rebound in the wake of easing geopolitical tensions, despite this, many risks remain for equity markets.
Thomas Hughes
UK flag, EU flag and financial buildings

The U.S. Market Is Slightly Higher In Early Trading

The U.S. futures market is indicating a slightly higher open in early trading. The Dow Jones Industrial Average and S&P 500 are both up about 0.30% while the NASDAQ leads.  Traders are breathing a sigh of relief in the wake of last week’s killing of Soleimani. The biggest hurdle was Iran’s retaliation, a strike that turned out to be restrained in the eyes of market participants. The second hurdle, Trump, has confirmed cooling tensions but vows to enforce more severe sanctions on Iran. The question in everybody’s minds now is whether Iran is responsible for the downing of the Boeing 737 earlier this week.

In corporate news, a new survey of CFO’s shows the majority believe the economy is slowing and stocks are overpriced. In earnings news, shares of JC Penny are down more than -7.0% after missing estimates for the holiday quarter. JC Penny has been in a downward spiral since Ron Johnson was in charge and can’t seem to recover.

On the trade front, China’s media confirms Vice Premier Lieu He will travel to Washington next week. The Vice Premier is expected to sign the Phase One Trade Deal although the market still does not have the details. Today’s jobless claims data is encouraging. The initial claims figures fell and continued to trend near historic lows. Continuing claims rose over the last week reflecting the impact of post-holiday lay-offs.

EU Markets Rebound, Brexit Drama Will Soon Take Center Stage

The EU equity markets are rebounding in early Thursday trading. The DAX is in the lead with a gain of 1.15%. The German index is outpacing all other after surprisingly strong factory output data. The FTSE is up about 0.45% as Brexit drama begins to heat up. The CAC trails with a gain of only 0.21%.

In Germany, factory output expanded by 1.1% posting the largest increase in 18 months. The news is a much-needed boost to sentiment suggesting some stabilization within the EU economy. In other news, the new EU Commission President responded to Boris Johnson’s ultimatum. She says the UK will find it impossible to negotiate a full deal by the end of the year. She also says the EU/UK relationship will never be the same as it was.

Retailer Marks&Spencer shares are down -7.5% after reporting weak holiday sales and issuing poor guidance. At the other end of the spectrum, Tesco shares are up 1.7% after it reported a modest rise in holiday-season sales.

Asian Markets Rebound, Japan Leads

The Asian indices also rebound in early trading. The Japanese Nikkei is up 2.31% to lead the market, Hong Kong and Korea are both up about 1.65%. Elsewhere in the region shares in China and Australia advanced about 0.855.

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