“Fake News” Sends Asian Markets Looking For Direction
A report from the Financial Times has the worlds major indices moving lower on Tuesday but the move was a knee-jerk reaction to “fake news”. The news, that US trade delegates had canceled a low-level meeting ahead of next week’s high-level trade talks sent the Dow Jones Industrial Average down more than 350 points but was later refuted. White House Economic Adviser Larry Kudlow says no meeting was scheduled, no meeting was canceled, and next week’s meeting with Chinese Vice Premier Liu He is still on.
Equity markets in Asia were mixed on the news, at once concerned the trade talks were hitting the rocks and relieved that progress was still expected. The Chinese indices were least affected by the news, the Shanghai Composite and Hang Seng indices both closed with small gains less than 0.10%. The Australian ASX, hurt by global GDP woe, was the biggest loser at -0.26%. The Japanese Nikkei closed with a loss of -0.14% while the Korean Kospi paced advancing issues with a gain of 0.47%.
Trade Concerns Weigh On EU Equities
The trade news, along with weak China GDP released earlier this week, and the IMF downgrade of global GDP (citing weakness in the German auto market) had equities in the EU moving lower in the earliest portion of Wednesday’s session. The good news is that strong earnings in the US outweighed concerns for slowing growth allowing equities to post small gains.
The French CAC led at midday with a gain near 0.5% and was followed by a near 0.25% advance in the German DAX. The UK FTSE 100 was the only major indices of the region to post a loss and a minimal -0.20% at that.
The tech and financial sectors were the hardest hit in the EU. The sector saw losses averaging -1.5% on concerns trade disputes and the global economic slowdown would impact sales this year. The financial sector was hit by a double-shot of bad news. The first is that Metro Bank warned growth slowed in the last quarter, news that had the stock down more than -25% in early trading. The second is that the Deutsche Bank is under investigation for its role in the Danske Bank money-laundering scheme.
Strong Earnings Lift US Futures
US futures indicated a positive open for the major indices on Wednesday morning. The combination of Larry Kudlow’s refuting of trade-related news and strong earnings helped lift sentiment and halve the previous day’s losses. On the earnings front, reports from consumer giant P&G and aerospace behemoth UTX both came in better than expected.
Proctor & Gamble reported a top and bottom line beat on solid organic sales growth. UTX reported a stunning top and bottom line beat on demand for aircraft parts, the company also gave strong forward guidance and sent shares up more than 4.0% in the premarket session.
Today’s action is going to be dominated by earnings, there are another dozen or so reports from S&P 500 companies after the bell. Currencies are likely to hold steady ahead of tomorrow’s expected policy statement from the ECB.