por admin » Mar Feb 26, 2019 9:40 am
U.S. Stocks Open Lower, Giving Back Some Early-Week Gains
Markets await further news on U.S.-China trade talks
David Hodari
Updated Feb. 26, 2019 9:34 a.m. ET
U.S. stocks followed global indexes lower Tuesday, relinquishing some of the gains made at the start of the week, as markets awaited further news on trade talks between the U.S. and China.
While stocks in Europe and Asia declined Tuesday, most major global bourses have remained higher for the week so far, after President Trump reiterated Monday that he would defer a planned rise in import tariffs on Chinese goods.
Trade developments will likely continue to be a key market driver in the coming days, with investors “held hostage by what happens on the trade front primarily,” according to Marie Owens Thomsen, chief economist at Indosuez Wealth Management. “Central bank outlooks are important but it seems we’re very much trading on the latest sentiment on trade talks more than anything else.”
Focus may shift to Capitol Hill later in the day, with Federal Reserve Chairman Jerome Powell scheduled to testify before Congress, providing an overview of the economy.
A gentler interest-rate outlook from the Fed has soothed traders’ nerves so far in 2019 and markets have since priced in zero rate increases this year. CME Group data last gave a 97.8% probability that interest rates would remain at or fall below their current levels until at least the December 2019 meeting.
An assembly line at the German car manufacturer Porsche in Stuttgart, Germany, 19 February 2019.
An assembly line at the German car manufacturer Porsche in Stuttgart, Germany, 19 February 2019. Photo: ronald wittek/Shutterstock
However, some market participants still see increases ahead. One February sentiment survey from Bank of America Merrill Lynch showed that 13% of respondents expected moves higher in 2019, with 7% saying the Fed will be able to raise in both 2019 and 2020.
In that context, any remarks by Mr. Powell will be closely scrutinized for signals about the central bank’s interest-rate and balance-sheet plans for the remainder of the year.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was last down 0.1%, extending its five-day losses to 0.5%, while the yield on 10-year U.S. Treasurys had last fallen to 2.655% from 2.673% late Monday. Yields fall as prices rise.
The Stoxx Europe 600 fell 0.1% in midday trading, weighed down by weakness in its trade-exposed constituents. The autos and parts sector fell 0.9% to reverse Monday’s gains, its fall was aided by a 2.2% drop in Peugeot shares after the French auto maker released earnings and said it was re-entering the U.S. market.
The U.K.’s FTSE 100 index underperformed its counterparts, falling 1.1% as the British pound jumped 0.8% against both the dollar and the euro. That came after the U.K.’s leading opposition party signaled its support for a second referendum on the country’s planned departure from the European Union. Prime Minister Theresa May subsequently announced Tuesday that in the event her proposed deal with the EU is voted down, parliament will hold votes on whether to leave the bloc without a deal or to postpone the U.K.’s departure date. The pound rose to a month high against the dollar.
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Such moves in the pound “can be quite exaggerated and the momentum tend to go on longer than one might think,” said Edmund Shing, global head of equity derivative strategy at BNP Paribas. “If this holds it’s a big move and it means the FTSE 100 will underperform in the same way it outperformed on the back of domestic worries.”
Shallow selling in Europe followed similar trading in Asia, where the Shanghai Composite Index and Hong Kong’s Hang Seng benchmark fell 0.7%. Financial stocks, particularly those of banks, were weighing on Chinese indexes after the country’s banking regulator said Monday the country’s banks should increase lending to private companies, which present a higher credit risk. That was followed Tuesday by comments from the country’s central bank saying deleveraging should continue.
In commodities, Brent crude oil futures were up 0.9% at $65.37 a barrel and West Texas Intermediate futures were up 0.3% at $55.67 a barrel, although both remained more than 3% lower so far this week after Mr. Trump tweeted “oil prices getting too high. OPEC, please relax and take it easy.”