Weak Data Weighs On U.S. Markets, Brexit Deal Reached, Asia Moves Lower

Stocks rise on the back of a new Brexit deal but the highs were not held, Parliament and the EU still need to accept the arrangement to stave off a hard-Brexit.
Thomas Hughes
Wall street in New York
Wall street in New York

Weak Data Clouds Outlook In The U.S.

Weak data in the U.S. clouded the outlook for earnings growth despite a round of better than expected reports. The Dow Jones Industrial Average and S&P 500 are up about 0.25% while the NASDAQ Composite is marginally higher. In economic news, housing and manufacturing data is weaker than expected with starts falling nearly 10% from the previous year. The good news is that data concerning single-family construction was positive suggesting a rebound in the stand-alone-housing market.

The Phily Fed’s MBOS fell by half from the previous month to hit 5.6. This is two points weaker than expected but still shows expansion within the manufacturing economy. On the labor front, jobless claims rose by 4,000 but remain very low relative to trend and below 220,000.

In earnings news, reports from Morgan Stanley, Honeywell and Netflix has all three stocks moving sharply higher. Morgan Stanley beat on the top and bottom lines sending its stock up nearly 4.0%. Honeywell missed in terms of revenue but beat on the bottom line and raised full-year guidance. That stock is up about 0.75%. Netflix is leading the market in early trading, up roughly 8.0% after it reported in after-hours trading on Wednesday. CEO Reed Hastings says he welcomes competition in his fast-growing market.

Brexit Deal Cinched, Stocks Surge

The good news is that Boris Johnson has secured a new deal with the EU negotiators. The bad news is the deal still faces opposition in the UK parliament as well as within the EU. Johnson says it is a “great new Brexit deal” while European Commission President Juncker calls the deal “fair and balanced”. Stocks surged on the news but the gains quickly faded as concerns resurfaced. The UK Parliament is expected to vote on Saturday, Johnson’s key Irish supporters are not expected to support the deal. The pound surged to a fresh 5-month high.

The German DAX is up about 0.05% at midday while the CAC is down nearly -0.25%. The UK FTSE 100 is leading the market with a gain of 0.60% but even traders there are wary. Banks are in the lead on a sector basis, up more than 1.5%.  Shares of retailer WH Smith gained 10% after the company announced it would seek greater exposure in U.S. airports.

Asian Markets Move Lower

Asian markets moved lower even as positive news on the Brexit deal was developing. The Hong Kong Hang Seng is the only index to move higher, it is led by property stocks. The property sector got a boost on Wednesday from Carrie Lam’s plans to ease a housing crisis. The Australian ASX is the biggest loser shedding -0.77% on Thursday trading. Shares of basic resources and materials are to blame.

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