- U.S. futures subdued on fears of trade deadlock over tariffs cutback
- European shares drift on Societe Generale , Mark & Spencer profits fall
- U.S. dollar retreats, flat at late July levels
Key Events
European shares and futures on the S&P 500, Dow and NASDAQ 100 drifted on fears of possible complications in U.S.-China trade negotiations, while bullish numbers for the U.S. service sector trimmed expectations of further Fed accommodation.
In particular, U.S. contracts were traded in a narrow range, after closing near Monday’s record highs yesterday.
The STOXX 600 returned toward the earlier lower opening after rebounding to the highest level since mid July 2015. Societe Generale (PA:SOGN) and Marks and Spencer (LON:MKS) posted a profits flop, eclipsing positive corporate results from Adidas (DE:ADSGN) and BMW (DE:BMWG).
Meanwhile, upbeat German factory orders only mildly boosted the euro, as eurozone manufacturing activity picked up slightly in October but remained near its weakest level in seven years.
In the earlier Asian session, regional equities ended mixed after Beijing was reported to be pressing for Washington to roll back tariffs before any progress on the deal could be made. Chinese officials are allegedly asking for 15% duties imposed on $125 billion of domestic goods in September to be cancelled as part of the so-called "Phase One" deal. The lack of any meaningful response by the U.S. side spurred fears of a new breakdown of negotiations.
Japan’s Nikkei 225 (+0.22%) nonetheless managed to cling onto persisting trade hopes, outperforming its peers and hitting a fresh 13-month high, also helped by a weaker yen and rising bond yields, which buoyed exporters and financials shares.
The 10-year yield climbed to its highest level in more than five months as an auction was met with weaker-than-expected demand amid a global debt sell-off. Technically, the yen is struggling with the 200 DMA, as it attempts to resume its rebound since August against the long-term downtrend.
Australia’s S&P/ASX 200 (-0.55%) underperformed.
Global Financial Affairs
Yesterday, U.S. stocks ended slightly off their record highs, while the market evaluated corporate profits and the broader economic outlook, with the elusive U.S.-China trade deal looming large in the background.
On the S&P 500 chart, the red candle posted yesterday, coming after Monday’s doji on a gap, could—although small—be the prelude for an Island Reversal, as it may prove to be an Exhaustion Gap: it may be the third one of this rally, since the Oct. 3 bottom.
Meanwhile, yields on 10-year Treasurys paused their ascent after a three-day climb. News that U.S. non-manufacturing sectors expanded more than forecast in October triggered a brief equity rally but dimmed hopes for a December rate cut from the Federal Reserve. Technically, yields are struggling against a confluence of the top of a symmetrical triangle and the downtrend line since November 2018.
The dollar retreated after strengthening for the second day on Tuesday, after reaching the highest price since it fell below its long-term uptrend line since February 2018. The price has remained flat since the Fed inaugurated its path to lower interest rates with a first rate cut on July 31, when the price was 98.06.
The yuan traded above the 7.000 mark for a second day.
Oil retreated after failing to cross above the 200 DMA for two days in a row. As for other instruments, a stronger direction for WTI prices continues to hinge on trade progress.
Up ahead
- Earnings are due from companies including: Softbank (T:9984) and Roku (NASDAQ:ROKU) on Wednesday; Walt Disney (NYSE:DIS), Toyota (T:8015) and Deutsche Telekom (DE:DTEGn) on Thursday.
- U.S. durable goods data is due Monday along with factory orders.
- Regional Fed presidents including Charles Evans, John Williams and Patrick Harker speak at events on Wednesday.
- Central bank monetary decisions are due on Tuesday in Australia and Thursday in the U.K..
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