Markets Reverse Early Losses, UK Election Two Days Away, China CPI Comes In HotFutures reverse early losses as positive news emerges on the U.S./China trade war and the USMCA.
The U.S. Futures Are Up In Early Trading
The U.S. futures are up in Tuesday’s premarket trading after reversing earlier losses. The major indices had been indicated lower due to news no Phase One Trade Deal would be reached this week. Later, the sentiment was buoyed by reports the U.S. would delay tariffs expected to take effect on Sunday. The sentiment was further lifted by news the House and Trump Administration were getting close to reaching a deal on the USMCA. Speaker Pelosi is expected to make an announcement about the USMCA later today.
The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite were all down about -0.30% in the early hours of the morning. The trade reversed to just above flat after the news on trade. Despite the good news, traders remain cautious. The FOMC begins its meeting today and is expected to make a policy announcement tomorrow. The general expectation is the FOMC will not act on interest rates until next summer, the statement may shed light on their view. No change in policy is expected at this meeting.
In economic news, U.S. 3rd quarter productivity was revised higher but remains negative. The -0.3% initial estimate was changed to -0.2%, the good news is that labor costs were revised lower. Labor costs for the 3rd quarter were revised down to 2.5% from a previous 3.6%.
EU Markets Fall On Tuesday
The EU markets are down on Tuesday despite the good news regarding trade. The DAX is in the lead and was down more than -1.0% by midmorning. The losses were less by midday, about -0.85% for the DAX, but traders remain wary. Along with uncertainty on trade, weak data from China and the UK election are dragging stocks lower. In China, CPI surged more than 4% while PPI declined. The news shows increasingly deteriorating conditions within the EU’s largest trading partner and is not good.
In the UK, candidates have two more days to convince voters they are the right choice. The polls have narrowed in recent weeks but incumbent PM Boris Johnson remains in the lead. In economic news, UK monthly GDP came in flat from the previous month and up only 0.7% YOY. This is the 3rd consecutive month of contraction or no growth in the UK.
Asian Indices Are Mixed On Tuesday
The Asian markets are mixed on Tuesday. The Nikkie, Hang Seng, and ASX all posted declines but the losses were small. The Shanghai Composite and Korean Kospi both advanced with the Kospi’s 0.45% gain in the lead. Investors in the region are biding their time waiting to see what happens on the trade front this week. The CPI/PPI news from China suggests they need to make a deal more than ever.