Renewed Trade Fear Weighs On Stocks, May Returns To Brussels, Weak Open Expected In The US
Hong Kong Reopens After The Lunar New Year Holiday
The Hong Kong Heng Seng Index reopened today after closing for the Lunar New Year Holiday. The first day of trading in the Year of the Pig was a dud, as expected considering the holiday atmosphere. Shares of Tencent led the decline with a loss of -0.52%. Equities markets in mainland China remain closed.
The Nikkei posted the largest decline on renewed trade fears. US sources including Larry Kudlow indicate the US and China are still far apart on trade, a meeting between Xi and Trump is not likely before the March 2nd deadline. If no accord is reached in principle or reality before March 2nd 10% tariffs on Chinese imports already in place will double to 20%.
Shares of Sony led the market with gains, bucking the bearish trend, driven by a new share buyback program. The program is the first ever in Sony’s history and sent shares of the stock up more than 4.0%. The Korean Kospi was also down, about -1.0%, on the trade news while the Australian ASX shed a less severe -0.34%.
European Markets Sour On Trade Woe
EU indices were moving lower in early Friday trading, led by the DAX. The German index was down about -0.50% at midday and possibly heading lower. The news on trade is a major setback for market sentiment and could weigh on equities in the near-term. Other major indices in the region were down about -0.25%.
News from the UK is that Theresa May is headed back to Brussels. She is expected to meet with EU officials to discuss alteration to the wording of the deal she has negotiated. EU officials have agreed to look at wording regarding the Irish-backstop, the major sticking point for Parliamentary approval.
In corporate news, shares of Skanska dropped more than -6.0% after announcing a smaller than expected dividend. In Italy, shares of Ubi Banco were halted after i t report ed weaker than expected revenue and earnings. Shares fell -5.0% in minutes and are not likely to recover if economic activity does not pick up.
US Futures Lower In Early Trading
US futures were lower in early trading as trade-related fears drag on sentiment. The S&P 500 was indicated as low as -0.60% in the early hours of pre-market trading but a bottom was formed and some of the losses were recovered by 9 AM. While trade is the cause of concern, it is slowing global growth and the deteriorating outlook for earnings that is weighing on stocks.
US equities are expected to post a net-negative earnings growth in the first quarter of 2019, the first decline in growth in two and a half years. Until the trend changes, traders should expect to see the major indices move sideways within their trading ranges.
There are no economic reports scheduled for today but there are a few scheduled for next week including the PCE price index. Next week’s data may be delayed because of the recent government shutdown, and possibly by another government shutdown if a spending deal isn’t reached in Washington.
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