Stock Market News Today 2018/08/29
Euro Stoxx >>> European shares edge up, optimism from U.S./Mexico deal fizzles.
European shares rose slightly at the open on Wednesday as optimism triggered by the U.S./Mexico deal gradually fizzled and uncertainty grew about a similar agreement with Canada and a lasting solution to the trade spat with China.
At 0719 GMT, the STOXX 600 (STOXX) was up 0.2 percent with most bourses and sectors trading in positive territory.
Germany’s RTL (DE:RRTL) posted the best performance of the pan-European index with a 6.2 percent rise after publishing forecast-beating growth in revenues and core earnings in the second quarter.
Micro Focus (L:MCRO), the British software company, came second with a 4.9 percent rise after it started a share buy-back program.
Pernod Ricard’s (PA:PERP) results received a rather cold welcome from investors with some analysts noting a disappointing guidance from the French spirits maker.
“We see Pernod as a core long-term staples holding, however current valuation makes it hard for us to put fresh money to work”, wrote Jefferies analyst Edward Mundy who maintained his ‘Hold’ rating on the deal.
Shares in Spain’s Inditex (MC:ITX) suffered after Morgan Stanley (NYSE:MS) rated the Zara owner “underweight” for the first time ever.
Gold >>> Gold Prices Edge Lower While Dollar Also Slips as China-U.S. Tensions Weigh.
Gold prices edged lower while the dollar also slipped as investors awaited further development on the China-U.S. trade disputes.
Gold futures for December delivery were 0.4% lower at $1,209.8 per troy ounce at 2:00AM ET (06:00 GMT) on the Comex division of the New York Mercantile Exchange.
Investors are likely to keep their eyes on any further developments in the Sino-U.S. trade dispute as the dealine for public comment on U.S. President Donald Trump’s tariffs on another $200 billion of Chinese goods is due early September.
Low-level trade talks between China and the U.S. ended last week with little progress made, while Trump is reportedly meeting his Chinese counterpart Xi Jinping later this year to further discuss trade issues.
The U.S. Dollar Index, which tracks the greenback against a basket of other currencies, slipped 0.02% to 94.61 by 1:10AM ET (05:10 GMT). The index dipped to 94.434 overnight in the U.S. session, its lowest since July 31.
The news of a trade deal between U.S. and Meixo to overhaul NAFTA were also cited as headwind for the greenback.
Crude Oil WTI >>> Oil slips on rising U.S. supply, Venezuela investment.
Oil prices slipped on Wednesday, pulled down by a rise in U.S. inventories and hopes that new investment could halt a plunge in Venezuela’s output.
Benchmark Brent crude oil (LCOc1) was down 20 cents at $75.75 a barrel by 0750 GMT. U.S. light crude (CLc1) was 10 cents lower at $68.43 a barrel.
U.S. crude inventories rose by 38,000 barrels to 405.7 million barrels in the week to Aug. 24, the American Petroleum Institute said on Tuesday.
“The API reported surprisingly flat numbers to a market expecting a reasonable draw in crude and a build in products,” said Sukrit Vijayakar, director of oil consultancy Trifecta.
Official U.S. fuel inventory and crude production data will be published later on Wednesday by the Energy Information Administration (EIA). Traders said reports of potential investment in Venezuela’s struggling oil production also affected markets.
Venezuelan crude exports have halved since 2016 to below 1 million barrels per day (bpd).
To stem tumbling output, Venezuelan state-run oil firm PDVSA said on Tuesday it had signed a $430 million investment agreement to increase production by 640,000 bpd at 14 oilfields, although some analysts doubted whether this investment would go through given the instability in the country.
Despite the risk of disruption, especially from OPEC-countries like Venezuela, Iran, Libya and Nigeria, Bank of America Merrill Lynch (NYSE:BAC) said global supply could climb towards the end of the year.
“Heading into 4Q18, we expect rising non-OPEC oil production as supply outages abate and greenfield projects ramp up,” the U.S. bank said. “Non-OPEC supply outages are at a 15-month high of 730,000 bpd. However, nearly half of these volumes are in the process of being restored.”
Adding to that will be new production in Canada, Brazil and the United States, which the bank said “should provide a substantial boost to non-OPEC supplies” during the second half of the year “taming upside pressures on Brent crude oil prices”.
Despite prospects of rising supplies, traders said crude markets remained relatively tight, largely because of the prospect of U.S. sanctions against Iran, which will start to target its oil industry from November.
Bowing to pressure from Washington, many crude buyers have already reduced orders from Iran, OPEC’s third-biggest producer.
Although Tehran is offering steep discounts, Iran’s August crude oil and condensate loadings are estimated at 2.06 million bpd, versus a peak of 3.09 million bpd in April, trade flows data on Thomson Reuters Eikon showed.
S&P 500 >>> Stocks hover as investors still on tenterhooks over trade deal.
Global stocks faltered on Wednesday as optimism over a U.S.-Mexico trade deal faded with investors anxious about Canada’s acquiescence and eyeing a deadline for the next round of China-U.S. tariffs next week.
Canada’s chief negotiator continued talks to preserve a three-nation North American Free Trade Agreement following Monday’s deal, but uncertainty over how long it could take for a final agreement to pass Congress kept moves muted.
MSCI’s world equity index, which tracks shares in 47 countries, edged down 0.02 percent from the 5 1/2- month highs it hit after Mexico and the U.S. struck their deal.
“The market is quite right to say after the knee-jerk reaction higher in the Mexican peso and equities, a) there was remarkably little detail, and b) what is the state of Canada?” said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.
“It helps this rebound in risk assets we’re seeing after the Turkey and global EM related selloff in the first half of the month, but it is an erratic rally because we need a bit more fuel to the fire.”
European stocks managed a 0.1 percent gain. So did EMini futures for the S&P 500 (ESc1).
U.S. President Donald Trump threatened to proceed with Mexico alone and levy tariffs on Canada if it does not come on board with the revised trade terms. But a trade deal might struggle to win approval from Congress unless Canada comes on board.
“The final decisions are unlikely until 2019 at the earliest,” said Goldman Sachs (NYSE:GS) analysts, adding that control of the House majority might have gone to Democrats by then, which could make passage of the agreement more difficult.
Currencies reflected investors’ remaining uncertainty.
The Canadian dollar stalled at 1.292 to the U.S. dollar. Mexico’s peso recovered 0.3 percent to 19.02 to the dollar, having slid 1.7 percent on Tuesday as concerns over Brazil’s elections affected the region.
CHINA TARIFF DEADLINE LOOMS
On another front of the global trade conflicts, analysts at JPMorgan (NYSE:JPM) noted the deadline for public comment on Trump’s increased tariffs on $200 billion of Chinese goods was less than a week away on Sept. 5.
“End-of-month flows could start to take hold into the end of the week, and combined with light news flow and the risk of impending trade war escalation could result in conviction remaining light,” they cautioned.
The White House has said it wants to settle NAFTA before dealing with China, suggesting that trade disputes will run well into 2019.
“There’s a big debate taking place among investors: is Trump hoping to reach agreement with all the big players to demonstrate what a successful negotiator he is, or is he trying to make sure he’s got agreement with NAFTA and the EU and therefore can turn all the firepower on to China?” said Aberdeen Standard’s Milligan.
Currencies quietened down after a turbulent few days, with the dollar index (DXY) 0.1 percent firmer at 94.833 after touching a four-week low overnight.
The euro eased a fraction to $1.1670 (EUR=) after hitting a one-month high at $1.1733 overnight. The currency’s gains are being capped by concerns over Italy’s budget.
“We believe that Italy is headed on a collision course with the EU as the two meet to discuss Italy’s budget in September,” wrote Man Group portfolio managers in a note.
But peripheral bond markets outperformed on the day, with Italy’s 2-year bond yield (IT2YT=RR) falling to 1.249.
Emerging market stocks (MSCIEF) were under renewed pressure, falling 0.2 percent.
Turkey’s lira slid 1.7 percent to around 6.4 to the dollar, a two-week low as concern grew about the effects of the country’s currency crisis after Finance Minister Berat Albayrak was quoted as saying he did not see a risk to the economy or financial system.
Overall, though, emerging markets have had a strong recovery from the sharp selloff earlier this month.