Opening Bell: Futures, EU Shares Climb; UK Assets Drop On Political Risk


  • European shares, futures mildly higher on positive ECB and PBoC signals
  • UK market, sterling edge lower on heightened political uncertainty
  • Yields fall on risk; yen, gold advance on dollar weakness

Key Events

European shares and futures on the , and 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 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.

GBP Daily Chart

GBP Daily Chart

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.

FTSE 100 Daily Chart

FTSE 100 Daily Chart

Heightened political instability in the UK meant that, while the gained ground for a second day this morning, with banks and miners in the lead, the 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 underperformed, slipping 0.55 percent. South Korea’s outperformed, gaining 0.43 percent.

UST 10-Year Daily Chart

UST 10-Year Daily Chart

Meanwhile, investors sold off bonds to increase stock holdings, pushing Treasury yields to 2.750, above the January 10 high, though they eased back later in the session.

Conversely, the and inched higher, mainly on 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.

Global Financial Affairs

In the U.S. session, technology shares led a rally fueled by Chinese plans for additional stimulus. The jumped 1.07 percent—the most in over a week. (+1.8%) outperformed, likely helped by the news that Microsoft (NASDAQ:) and Walgreens (NASDAQ:) will join forces to streamline services in the health care market. (-0.66%) and (-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?

Up Ahead

  • A confidence motion vote will take place after 7 p.m. in London as the opposition Labour Party tries to force a general election.
  • Canadian is released Thursday.

  • Canadian and for December are released Friday.

  • Canadian for November are released Friday.

  • Canadian for November are released Friday.

Earnings

  • (NYSE:), scheduled to post corporate results today before market open, with an EPS forecast of $0.63, up from last year’s $0.47 for the same quarter.
  • (NYSE:) is due to report Wednesday before market open an EPS of $5.5, slightly lower than the same quarter last year, when it posted $5.68.
  • (NYSE:), will announce earnings Wednesday after market close, with an expected $0.44 EPS, from last year’s corresponding quarter of $1.04
  • (NYSE:) is due to post earnings Thursday before market open. EPS is seen at $0.90, from $0.84 for the corresponding quarter last year.
  • (NASDAQ:), expected to report earnings Thursday after market close, with a $0.25 EPS, lower than the $0.41 posted for the same quarter last year.
  • (NYSE:) is scheduled to release results Thursday after market close, showing a $1.79 EPS, to follow the $1.58 of the same quarter last year.
  • (NYSE:) is scheduled to report corporate earnings Wednesday before market open, with a $6.53 EPS, slightly higher than the $6.24 posted for the same quarter last year.

Market Moves

Stocks

Currencies

Bonds

Commodities

  • fell less than 0.05 percent to $52.09 a barrel.
  • Gold rose 0.1 percent to $1,290.23 an ounce.



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