Investing.com | Jan 16, 2019 05:30
European shares and futures on the S&P 500, Dow and NASDAQ 100 edged higher this morning, helped by positive reports from both the People's Bank of China (PBoC) and the European Central Bank (ECB). Chinese policymakers injected record sums into the country's financial system on Wednesday, in line with Tuesday's pledge to stimulate the country's economy in the face of the recent trade war fueled slowdown. ECB president Mario Draghi reassured European markets by posting a positive outlook for the eurozone, whose economy, he said, will head off a full-fledged recession.
However, positive signals regarding the broader economic backdrop failed to reach UK markets, where shares lagged and pound sterling whipsawed ahead of a no confidence vote on Prime Minister Theresa May's leadership. The British PM suffered an historic 432-203 parliamentary defeat on Tuesday, reflecting the widely unpopular Brexit deal she brokered with EU officials.
Cable took a wild ride yesterday, with prices ranging almost 2 percentage points between the intraday high and low, though it finished the day higher. The bounce from the extreme bottom to the final gain suggests that the pronounced parliamentary defeat for May's Brexit proposal was priced in, and perhaps even hoped for. Technically, sterling faces the resistance line of its short-term rising channel within a long-term falling channel.
Heightened political instability in the UK meant that, while the STOXX Europe 600 gained ground for a second day this morning, with banks and miners in the lead, the FTSE 100 bucked the trend and turned lower. Technically, the UK benchmark index found resistance at the top of its trading path since early November.
In the earlier Asian session, most regional benchmarks advanced, shrugging off UK political jitters. Japan’s Nikkei 225 underperformed, slipping 0.55 percent. South Korea’s KOSPI outperformed, gaining 0.43 percent.
Meanwhile, investors sold off bonds to increase stock holdings, pushing 10-year Treasury yields to 2.750, above the January 10 high, though they eased back later in the session.
Conversely, the Japanese yen and gold inched higher, mainly on dollar weakness rather than because of a broader risk-off shift. This is also confirmed by the fact that stocks are on the rise, alongside bond yields. However, gold retreated slightly and the USD re-gained some ground in the late European morning.
h2 Global Financial Affairs/h2In the U.S. session, technology shares led a rally fueled by Chinese plans for additional stimulus. The S&P 500 jumped 1.07 percent—the most in over a week. Health Care (+1.8%) outperformed, likely helped by the news that Microsoft (NASDAQ:MSFT) and Walgreens (NASDAQ:WBA) will join forces to streamline services in the health care market. Materials (-0.66%) and Industrials (-0.31%), the two most sensitive sectors to trade jitters, were the only sectors closing in the red. We’d expect the 'trade-resolution proxy' shares to outperform, amid what could be seen as the most promising phase of negotiations yet since the tariff tit-for-tat erupted in March last year.
Besides, we have already shown how the normal market structure—via sector causations and correlations—has broken down, which is typical before a top amid a lack of leadership. Is this more of the same? Or, perhaps, yesterday glitches in trade-sensitive stocks were driven by reports that U.S. Trade Representative Robert Lighthizer sees no headway on the “structural issues” in the U.S.-China negotiations?
h2 Up Ahead/h2Canadian ADP Nonfarm Employment Change is released Thursday.
Canadian Consumer Price Index and Core CPI for December are released Friday.
Canadian Foreign Securities Purchases for November are released Friday.
Canadian Foreign Securities Purchases by Canadians for November are released Friday.
Earnings
Stocks
Canada’s S&P/TSX Composite closed up 0.47 percent Tuesday.
Currencies
The Canadian loonie was up 0.06 percent against the U.S. greenback early Wednesday, trading at 0.7542.
Bonds
Canada’s 10-year yield was up early Wednesday at 1.996, a 1.27-percent decrease.
Commodities
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