- US futures waver after news of potential Trump subpoena
- Raw material and technology push European shares higher
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Asian indices edge lower after Labor Day break
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Tech stocks drive US equity bounce back in second half of Tuesday session
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Apple shares jump in the after market following upbeat earnings
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Dollar retreats, gold advances
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China devalues yuan more than expected ahead of trade negotiations with the US
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Oil rebounds in line with technicals, after falling on overstock report
Key Events
European equities managed to climb higher after a broadly declining Asian session. With the exception of Australia's upbeat S&P/ASX 200, regional indices from Japan's Nikkei 225 to China's Shanghai Composite and Hong Kong's Hang Seng posted general weakness, as investors returning from the Labor Day holiday break digested corporate results and tried to predict the outcome of the Fed’s looming rate decision.
Safe-haven assets rallied, with gold gaining ground and yields on 10-year Treasury jumping back to 2.99, although they remained below the key 3.00 percent level.
Equities in growth sectors raw material and technology outperformed, helping the STOXX 600 resume a three-day rally that had been interrupted by Tuesday's losses. The price gains extended a breach to the presumed resistance provided by the February 26, 384.13 high.
US futures for the S&P 500, the NASDAQ 100 and the Dow are inching higher after posting an earlier decline, following news reports that special counsel Robert Mueller could issue a subpoena forcing US President Donald Trump to appear before a grand jury, as part of the investigation into the alleged Russian meddling in the 2016 US elections.
If that wasn't enough to unsettle investor nerves, the president’s former doctor Harold Bornstein revealed that he never signed off a doctor’s note, publicized on the eve of the presidential primary contests, attesting that then-candidate Trump was “astonishingly healthy."
Global Financial Affairs
Today’s mixed performance for global stocks follows yet another US volatile session—something that is becoming the norm, after a year of unprecedented low volatility.
After a lower open, the S&P 500 and the NASDAQ Composite bounced back in the second half of the day, while the Dow Jones Industrial Average fell for the third straight day, after manufacturing numbers disappointed, showing the sector expanded at the slowest pace since July in April.
The late rebound in US equities was led by tech stocks, after Apple (NASDAQ:AAPL) reported best-ever second quarter revenues of $61.1bn, up 16 percent, and a 30 percent EPS growth. The iPhone maker also announced a $100 billion buyback and a 16 percent dividend rise. At the time of writing, the premarket price for the stock is $175.14, $6.04, or 3.54 percent up from yesterday’s closing price—still beneath the top of its falling channel.
First quarter earnings released on Wednesday caused shares to fall 4.27% in Paddy Power Betfair (LON:PPB). Profits and revenue dipped for the gambling company in part due to race cancellations as a result of weather conditions in the UK and Ireland.
UK Standard Chartered (LON:STAN) shares were down 1.24% despite Wednesday's Q1 earnings report showing a strong start to 2018.
Shares in Ocado Group (LON:OCDO) increased more than 2.48% on Wednesday following news that the UK online grocer was planning to partner with Swedish ICA Group in order to develop its online business.
The dollar is edging lower despite expectations of an hawkish Fed—a policy stance that, if confirmed, would buck the trend of other central banks including the BoE, the ECB and BoJ, which have posted a more dovish stance. Investors should watch closely for any signal on whether the much talked about additional 3 interest rate hikes for the year will materialize.
Should the USD close lower, it would end a five-straight day advance. The greenback is primed for a correction, after it the biggest jump in a week yesterday, within a winning 10-session streak out of 11 that propelled the RSI to a 75 overbought level,for the first time since late November 2016. Will the 200 DMA, currently at 91.97, provide a support, or will the less than half of one-percent penetration prove a bull-trap, while the most observed moving average proves to be a resistance?
The People's Bank of China set the yuan reference rate to 6.3670 against the dollar, lower than the 6.3610 forecast, marking the biggest deviation since February 7. This extends a pattern since April of weaker-than-expected fixings. China seems to pursue a strategy of weakening the yuan aggressively to have more room for flexibility in negotiations with the US. However, this strategy may also be aimed at countering the effect of US import tariffs, suggesting further devaluation is in store.
The pound pared losses on Wednesday following the release UK construction PMI for April, which showed a better than expected start to the second quarter for the construction industry. Research firm Markit said its construction PMI for April came in at 52.5, while analysts had expected a reading of 50.5. Sterling was up 0.21% on the dollar following the release.
WTI crude rebounded after yesterday’s fall, which followed a API report that showed a surprise 3.427M barrels build vs the expected, more than three times the previous 1.099M build. The WTI price rebound is in line with the bullish Rising Flag.
Up Ahead
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The Federal Open Market Committee decides on interest rates on Wednesday, at the end of its two-day meeting.
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US nonfarm payroll numbers, scheduled for Friday, will probably show an increase for the month of April, while the unemployment rate is forecast to drop to 4 percent.
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Tesla (NASDAQ:TSLA) is scheduled to report earnings today after market close, for the quarter ending March, with a $-4.45 EPS, vs last year’s same quarter $-1.97 EPS. Will numbers confirm a bumpy ride for the electric vehicle and energy storage mega cap?
- Eurozone Unemployment Rate (March), GDP Growth (Q1, flash) are coming up on Wednesday: unemployment is forecast to remain at 8.5%. QoQ GDP to slow down to 0.4% falling from 0.6%, and 2.5% YoY, from 2.7%.
- UK services PMI will be released on Thursday at 08:30 GMT. Services PMI is expected to increase to 53.3 in April, from 51.7 in March.
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The UK Prime Minister Theresa May is meeting with the Brexit 'War Cabinet' on Wednesday to discuss new and existing ideas for what the government is now calling a ‘customs partnership’ with the EU following Brexit. A customs union between the UK and EU is one of the sticking points in the Brexit negotiations.
Market Moves
Stocks
- The UK's FTSE 100 Index was up 0.38% to 7548.92
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The STOXX Europe 600 Index climbed 0.1, to the highest level in three months.
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Futures on the S&P 500 Index declined less than 0.05 percent.
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The MSCI Emerging Market Index fell 0.4 percent, the largest drop in a week.
Currencies
- The pound increased 0.21% to 1.3643 against the dollar.
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The Dollar Index decreased 0.15 percent, paring from an earlier 0.25 percent decline.
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The Japanese yen advanced less than 0.05 percent to 109.82 per dollar.
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The euro increased 0.2 percent to $1.2013.
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The euro versus Switzerland’s legal tender declined less than 0.05 percent to 0.837 per franc, the weakest level in more than a week.
Bonds
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The yield on 10-year Treasuries gained two basis points to 2.99 percent, the highest in a week.
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Japan’s 10-year yield gained less than one basis point to 0.047 percent, the largest gain in a week.
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Germany’s 10-year yield climbed two basis points to 0.58 percent, the biggest surge in more than a week.
Commodities
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Gold gained 0.5 percent to $1,309.77 an ounce.
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West Texas Intermediate crude jumped 0.7 percent to $67.75 a barrel, the biggest increase in two weeks.
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LME aluminum fell 0.5 percent to $2,249.50 per metric ton.