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Top 5 Things to Know in The Market on Tuesday

EconomyMay 28, 2019 06:17
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© Reuters. -- These are the top 5 things you need to know in financial markets on Tuesday, May 28.

1. Wall Street set to open mixed

Stock markets are set to reopen flat after the Memorial Day weekend, after President Donald Trump’s visit to Japan failed to provide any real clarity about what will come next in the U.S.’s trade dispute with China.

At 05:30 AM ET, the S&P 500 futures contract was down 3.6 points or 0.1%, the Dow futures contract was down 7 points, less than 0.1%, while the tech-heavy Nasdaq 100 contract was down 1.5 points, also effectively flat.

2. Bond yields hit 18-month low

The demand for safe-haven assets continues to grow. Yields on 10-year U.S. Treasury bonds hit 2.27% overnight, their lowest since October 2017, while the two-year yield, which is more closely tied to the Federal Reserve’s official interest rates, fell to 2.13%, equalling a 15-month low that it hit last week.

The trade dispute with China has encouraged investors to bet on the Federal Reserve cutting interest rates to support the economy. That thesis will be tested later in the day by the latest data on national house prices at 9 AM ET (1300 GMT), and by the release of the Conference Board’s consumer confidence index at 10 AM ET (1500 GMT).

3. Fiat Chrysler wants to merge with Renault

The global automotive industry could be on the verge of a major shake-up. Fiat Chrysler Automobiles (NYSE:FCAU) has proposed merging with France’s Renault (PA:RENA), and the French group has said it will “study with interest the opportunity.”

On their own, the two companies would make the world’s third-largest auto group. But if Renault’s current strategic partners, Nissan and Mitsubishi, joined the party, the new group would become the world's top group by sales, ahead of Toyota Motor Corporation ADR (NYSE:TM) and Volkswagen (DE:VOWG_p).

Both FCA and Renault rose over 10% on Monday, but have fallen back a little in early trading on Tuesday due to profit-taking.

4. EU horse-trading gets serious

The horse-trading to decide on who will rule Europe for the next few years gets started in earnest later today, as EU heads of government meet to start discussions on appointing the next European Commission.

Elections to the European parliament at the weekend strengthened the hands of the Greens and liberal centrists backed by French President Emmanuel Macron. That makes it harder for Germany to advance Angel Merkel’s preferred candidate, the conservative Manfred Weber, to the top of the powerful bureaucracy.

Other candidates to succeed Juncker include Michel Barnier, the Frenchman who led the EU’s negotiations with the EU over Brexit, and the current Competition Commissioner Margrethe Vestager, who has fined the likes of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL) heavily in recent years for antitrust abuses.

5. Echoes of a trade war

The U.S.-China trade war enjoyed something of a lull over the weekend, as official pronouncements on the subject dried up. However, the issue continues to play out in indirect ways.

Alibaba (NYSE:BABA) is planning to raise up to $20 billion later this year with a secondary listing in Hong Kong, according to various reports citing people familiar with its thinking. The move would ensure the company still has access to international investors even if the trade war affects its New York listing.

Elsewhere, the strains in China’s financial system started to show after Chinese authorities seized control of a bank for the first time in more than 20 years on Friday, citing “serious” credit losses.

The yuan, meanwhile, weakened 0.3% to 6.9290 to the U.S. dollar in the offshore market.

Top 5 Things to Know in The Market on Tuesday

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