Optimistic Markets Rise On Trade Hopes, Tech Leads Rally In Europe, Headwinds Slackening In US

Asian Markets Optimistic On Trade

Asian indices were up across the board on optimism trade, earnings, and global economic trends would improve in 2019. The Hong Kong-based Hang Seng led with a gain of 1.65% despite cautious comments from US Secretary of Commerce Wilbur Ross. Ross says the U.S. and China are miles and miles from reaching an agreement and that there are still lots of issues, obvious comments but true nonetheless. In China, the Shanghai Composite rose a more tepid 0.39%.

Tencent was among the day’s leaders.  Shares of the tech giant were up more than 4.0% after the company received approval from Chinese authorities for two new games. In Tokyo, the Nikkei advanced nearly a full percent following better than expected consumer-level inflation. CPI came in at 1.1% beating the expected 0.9% and helped lift economic outlook.

The Korean Kospi was up a little more than 1.5% at the end of Friday’s session on strength in autos and tech. The move was accompanied by better than average trading volume ahead of next week’s trade talks. The Australian ASX posted a solid 0.68%.

Tech Leads In Europe Despite Intel’s Revenue Bomb

The tech sector was among today’s leaders at midday for the European equity markets. The semiconductor specifically saw gains greater than 2.0% despite the weak report and guidance from the U.S. based Intel the night before. Intel missed revenue and EPS for both of its core units and expects the same for the coming quarter at least. The news is contrary to results from SK Hynix the day before but for now is an isolated event; chipmakers were up nearly across the board.

The German DAX was leading at midday with a gain near 1.40%. The German index was bolstered by Thursday’s ECB results which confirm outlook the EU central bank will keep rates at their current level longer than anticipated. The French CAC followed with a gain of 0.85% but the UK FTSE 100 remains under pressure. Brexit concerns linger, the deadline is fast approaching.

Headwinds For Equities Are Slackening

In the US there are signs that headwinds to growth could be slackening. The US government shutdown, trade relations, and FOMC balance sheet unwinding are in the news and there are some positive developments. Regarding the shutdown; a bipartisan group of Senators is said to be working on a means to a partial fix. The fix would allow some key funding to go through but is only a stop-gap measure at best.

On the trade front, Secretary of the Treasury Steve Mnuchin had some good things to say. According to him, there has been a lot of progress although no deal has yet been reached. He and other top trade advisors are set to meet with Chinese Vice Premier Liu He next week.

The FOMC may be close to ending its balance sheet run-off, according to a report in the NY Times. The Fed’s balance sheet run-off amounts to roughly 1.0% of policy tightening annually and has been criticized as holding back economic activity. If the FOMC, scheduled to meet next week, does end the run-off it would be a boost to market liquidity. The major US indices were up in early premarket trading averaging 0.80% to 1.0%.