Producer Inflation Rises, Powell Says No Policy Change Expected, Chinese Industrial Production Slows

Global markets tread water following news the U.S/China trade talks have hit an impasse.
Thomas Hughes
Inflation

The U.S. Futures Are Down In Early Trading

The U.S. futures are down in early trading following word the U.S./China trade talks have hit an impasse. Both sides are balking at demands of the other, the key issues remain the same. China is hesitant to commit to specific agricultural products and demands tariffs be rolled back while Washington wants controls and enforcement on intellectual property rights and forced tech transfers. A Phase 1 deal appears to be as elusive as ever. The Dow Jones Industrial Average and S&P 500 are both down about -0.15% while the NASDAQ is down about -0.20%.

In stock news, Walmart reported better than expected top and bottom lines. The mega-retailer says comps were strong and delivered solid revenue growth in the brick&mortar and e-commerce segments. The company raised its guidance for the second time this year, pointing to a strong holiday season, and the stock rose more than 2.0%. Reports from Nvidia, Applied Materials, and Aurora Cannabis are due out after the bell.

In economic news, the U.S. PPI came in a bit hotter than expected. The headline MOM 0.4% is a tenth above expectations. The caveat is that YOY producer price inflation remains very weak. Despite the weakness, there is no expectation for future FOMC rate cuts. Chief Jerome Powell said in testimony to Congress the committee is not likely to change policy while the economy is still growing.

EU Markets Move Lower

The EU indices are mostly lower at midday. The impasse in trade talks is the primary cause. The German DAX is in the lead with a loss of -0.40% despite better than expected 3rd quarter GDP. German GDP came in at 0.1% versus a -0.1% expectation and narrowly avoiding an official recession. The UK FTSE 100 is down about -0.30% while the French CAC is hugging break-even.

In the UK, Prime Minister Boris Johnson is a step closer to forcing his Brexit plan through Parliament. A new poll shows the ruling Conservative Party up 10% over main opposition rivals. This comes just days after the Brexit Party agreed to step aside from its seats in an effort to aid Johnson.

Asian Markets Are Mixed

The Asian indices are mixed at the end of Thursday trading. Most markets moved higher but weakness in Japan and Hong Kong is notable. In Japan, the Nikkie fell -0.76% and led by FamilyMart. FamilyMart fell nearly -3.0%. The Hong Kong Hang Seng ended the day down -0.93% on weakness in Tencent. Tencent fell another -2.44% following Wednesday’s weak earnings report. The Shanghai Composite, ASX, and Kospi are all up at the end of the day.

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