October 24, 2019 / 7:53 AM / 4 months ago

Daily Briefing: Fog lifts and tech shines

LONDON (Reuters) - About to run the gauntlet of several major central bank decisions as some geopolitical fog clears, world markets pushed higher again on Thursday.

European Central Bank (ECB) President Mario Draghi testifies before the European Parliament's Economic and Monetary Affairs Committee in Brussels, Belgium September 23, 2019. REUTERS/Francois Lenoir/File Photo

Mario Draghi’s last policymaking meeting as president of the European Central Bank later today is not expected to deliver any new monetary stimulus, but his press conference is likely to defend recent decisions to ease credit yet again – not least as splits on the council have emerged over whether the central bank is doing more harm than good by pushing interest rates and bond yields ever deeper below zero.

An expected rate cut from the U.S. Federal Reserve next Wednesday and possibly more easing from the Bank of Japan are also now on the radar.

More generally, market tensions around the U.S. trade war, Brexit and the latest multinational military standoff in Syria have eased somewhat.

Both Washington and Beijing are once again talking up the prospects of some wider agreement next month, another likely Brexit extension takes no-deal fears there off the table for now and U.S. President Donald Trump lifted sanctions on Turkey late Wednesday as he claimed a ceasefire between Turkish and Kurdish forces in northern Syria was holding.

The policy and political tailwinds are just as well — economic data and corporate earnings are far from rosy, even if not quite as bad as some feared.  

Poor quarterly readings from Boeing and Caterpillar were greeted with relief on Wall Street they weren’t worse.

Shares in both rose more than 1% on Wednesday. The glum mood in the tech sector from chipmaker Texas Instruments lifted overnight after Microsoft issued a forecast for sales of its cloud computing services that exceeded analysts' expectations.

Electric carmaker Tesla’s stock jumped 21% after the bell after the company reported a profit for the third quarter.

In Europe, results from Apple suppliers Dialog Semi and STM both beat expectations.

The better tech mood rippled through Asia markets overnight, with Tokyo’s Nikkei rising to its highest in more than a year.

Taiwan’s stock benchmark was up 0.8% and South Korea’s Kospi was up 0.3%. Shanghai underperformed and was flat, but Hong Kong’s Hang Seng gained 0.6%.

In Europe, equities were also expected to advance before the ECB meeting as October flash business surveys for the region are released through the morning. Euro/dollar was higher against a weaker dollar.

Ten-year German bund yields were at minus 40 basis points before Draghi’s final set-piece.

Sterling steadied as traders worked out just how long a Brexit extension the European Union is willing to grant Britain when it makes the decision on Friday.

That may be crucial in deciding whether the UK government and opposition parties opt for a snap election.

The assumption is that the 27 other EU members will grant an extension at least until January, with Britain possibly exiting the union at various points before then if it manages to pass legislation related to last week’s agreement.

However, the government’s lack of a majority means that could take several weeks at least, and it may choose to take advantage of its lead in opinion polls to go for an election as soon as early December.

Elsewhere, Sweden and Norway’s central banks meet and while no policy changes are expected today, they may both signal further easing by the end of the year.

In emerging markets, Turkey’s lira gave back some of the 1%-plus gains it made on Wednesday after Trump lifted sanctions on Turkey and is now awaiting today’s policy decision by the Turkish central bank, which is expected to cut interest rates by another 100 basis points to 15.5%.

On the European corporate front, Nokia is expected to slump at the open after it reported third-quarter profit in line with expectations but lowered its full-year profit forecasts for 2019 and 2020, citing tough competition and additional investments. Its shares are seen down 7% to 15%.

Daimler shares are expected to rise after third-quarter EBIT growth beat expectations. Its results follow disappointing numbers from Ford, which cut its operating profit forecast, highlighting the challenges for the export oriented sector.

Among chipmakers, results from Apple suppliers Dialog Semi and STM both beat earning expectations. Dialog shares are up 3.7% in early Frankfurt trade.

Royal Bank of Scotland swung to a third-quarter loss, after making a new 900 million-pound provision to settle mis-selling claims. One trader sees its shares down 3% at the open.

A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own. 

Editing by Larry King

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