November 13, 2019 / 8:54 AM / a month ago

Daily Briefing: No big trade signal as Powell takes the stand

LONDON (Reuters) - It was barely worth the wait.

Federal Reserve Chair Jerome Powell holds a news conference following the Oct. 29-30 Federal Open Market Committee meeting in Washington, U.S., October 30, 2019. REUTERS/Sarah Silbiger

U.S. President Trump spent more time berating the Federal Reserve in his speech on the economy last night than revealing any new trade truce with China – disappointing markets, which were expecting some breakthrough, or even some new signal, on the U.S.-China trade war.

Trump remained bellicose – saying a deal was potentially close, but reserving the right to ratchet up tariffs "very substantially" against Beijing if no deal was sealed early next month.

He went on to blame the Fed for the slowdown in the economy and said, referring to negative interest rates overseas, “Give me some of that.”

Wall Street stocks ended higher, with the S&P 500 closing just off the record high it set earlier in the day, but futures gave up a few points through the night and Asian stocks fell.

Shanghai stocks lost 0.3%, with Tokyo and Seoul’s main indices down 0.8%.

Intensifying violence and disruptions on the streets of Hong Kong saw the Hang Seng suffer most in the region with losses of 2% - putting its underperformance for the year against both global indices and Shanghai at about 15% after several months of the street protests.

Ten-year U.S. Treasury yields fell overnight to just above 1.91% early on Tuesday.

The dollar was higher on its DXY index, but China’s offshore yuan gained.

New Zealand’s dollar was up more than 1% after the Reserve Bank of New Zealand – one of the first developed-world central banks to cut interest rates this year – surprised markets by leaving policy unchanged on Wednesday.

Fed Chairman Jerome Powell testifies to Congress later and is expected to reiterate policy is on pause for the remainder of 2019, following three consecutive rate cuts this year.

That will underline growing market optimism about an imminent trade deal and the fact recession can be avoided next year.

Bank of America Merrill Lynch’s latest survey of fund managers published on Tuesday showed sentiment about global growth was at its highest in 18 months after its biggest single monthly jump in 20 years – leading investors to cut their defensive cash levels to their lowest since 2013.

Elsewhere on Capitol Hill, televised impeachment hearings against Trump get underway just as Turkish President Tayyip Erdogan holds talks with Trump at the White House. Turkey’s lira was steady before that meeting.

In Europe, stock futures were down about 0.4%, mainly on the lack of new signals on trade and disappointment that Trump didn’t talk about the expected six-month delay in U.S. tariffs on European carmakers.

Euro zone industrial production numbers are due for release later.

Euro/dollar clung on to $1.10 first thing Thursday, with German bund futures higher.

Sterling was little changed, with the latest UK election opinion polls showing PM Boris Johnson’s Conservatives still ahead of the main opposition Labour Party.

One YouGov poll late Tuesday showed that lead at more than 10 percentage points.

In emerging markets, Chile’s peso fell more than 4% to record lows at one point on Tuesday amid street protests over the economy.

Chile’s finance minister warned of “grave consequences” for the economy of three weeks of unrest.

Central bank President Mario Marcel said that despite the peso’s decline, Chile’s fiscal situation remained “solid”.

In European corporate news, Italy's Enel, Europe's biggest utility by market value, raised its core earnings target for the year after nine-month operating results beat expectations, lifted by its network business in Latin America. One trader saw its shares opening up around 1%.

Shares in Deutsche Wohnen were up 1.5% after the German real estate company, recently hit by plans to freeze rents in Berlin, repeated its March forecast and said it would buy back 750 million euros worth of its own shares.

Italian luxury group Ferragamo shares were expected to rise after it posted third-quarter core profit above expectations.

Germany’s Bechtle and Nordex were up in early Frankfurt trade after results.

Dutch bank ABN Amro reported a bigger-than-expected 24% drop in third-quarter net profit as the costs of client oversight rose amid an investigation into the lender's alleged incapability to spot money laundering.

Its shares were expected to tall 1% to 2% at the open.

HSBC and Standard Chartered may fall amid the unrest in Hong Kong, where bank branches were closed.

Cable maker Prysmian shares were expected to fall after its results.

Tullow Oil may fall after it cut its 2019 oil production outlook and forecast lower free cash flow for the year because if problems at its Ghana fields.

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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