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Futures Flat, Traders Eye Earnings, Global Economic Expansion Continues

The U.S. Futures Are Flat In Early Trading

The U.S. futures are flat in early Tuesday trading. Traders are anxiously waiting on a deluge of earnings reports and an FOMC policy statement due out tomorrow. The major indices were all hugging the flatline with industrials posting gains and the tech sector small losses. The market has just reached new all-time highs so price action over the next few days is extra-important. A failure to maintain these highs or weak follow-through could result in a major price correction.

In earnings news, McDonald’s posted better than expected top and bottom line growth on strength in comp sales. Comp-store sales were reported up 5.4% which is 2.0% above the consensus estimate. Shares of McDonald’s rose more than 3.0% in pre-market trading. Shares of GE were also moving sharply higher, +10.0%, after it beat revenue expectations and doubled the EPS consensus. Google parent Alphabet was not so lucky. The Internet giant reported weaker than expected and saw its shares fall -7.0%.

Today’s economic data includes the Employment Cost Index. The Employment Cost Index shows a 0.7% increase in wages and benefits during the first quarter, in line with expectations. Costs of employment rose 2.8% over the trailing 12-month period which is also in line with expectations. The data shows steady increases in wage inflation but not at a pace to worry the FOMC. The FOMC is not expected to alter policy at this meeting.

Global Equities Mixed, EU GDP Better Than Expected

European equities were flat and to down at midday in Tuesday trading. The CAC led with a loss near -0.25% with the DAX and FTSE closer to break-even level. The move is despite a better than expected read on GDP so raises doubts about future market gains. EU GDP was reported at 0.4% MOM and 1.2% YOY which both beat consensus estimates. The news is a relief for troubled markets but does not alter the possibility of further slowing in the EU economy.

Basic resources were among the biggest losers. Their exposure to China and weak manufacturing data from that nation had the sector down more than -1.5%. Glencore led the decline with a loss of -4.0%. Chip-maker AMS was up nearly 20% at midday. The company, an Apple supplier, reported better than expected and provided an upbeat outlook for the year. Apple reports after the close of U.S. trading today.

Asia Mixed, China Rises Despite Weak Data

Asian equities were firmly mixed at the end of trading on Tuesday. The Shanghai Composite was the only index in the green, up about 0.50%, despite weaker than expected PMI data. The official manufacturing PMI and small-cap Caixin PMI both fell from the previous month to just above 50. The readings show expansion in the sector but at a slower pace than before and below expectations. The Hong Kong Hang Seng, Australian ASX, and Korean Kospi all closed with losses between -0.5% and -0.70%. Trade talks are expected to continue this week. Earlier in the week, U.S. Treasury Secretary Steve Mnuchin said the talks had entered the final laps.