Global stocks edge higher as trade deadline nears, crude prices down
Sterling brushes off poll showing narrower Conservative lead
NEW YORK, Dec 11, (RTRS): Global equity markets rose on Wednesday as investors expected US President Donald Trump would delay his promised new tariffs on Chinese goods, while oil prices fell after data showed an unexpected rise in US crude inventories.
Gold rose and the US dollar traded near break-even against a basket of major currencies ahead of central bank meetings in the United States and Europe, a general election in Britain and a Dec 15 deadline for the new round of US tariffs.
US Treasury yields drifted lower, weighed by uncertainty over the UK election on Thursday, which could determine the fate of Britain’s exit from the European Union.
Paramount in investors’ minds was the looming US deadline on tariffs, with no immediate clarity on what the decision will be. The 17-month trade war has roiled capital markets and crimped global growth, noticeably in China.
The White House’s top economic and trade advisers are expected to meet in coming days with Trump over the decision, a source told Reuters.
MSCI’s gauge of stocks across the globe gained 0.22%, while the pan-European STOXX 600 index rose 0.19%.
On Wall Street, the Dow Jones Industrial Average fell 43.44 points, or 0.16%, to 27,838.28, the S&P 500 gained 3.72 points, or 0.12%, to 3,136.24 and the Nasdaq Composite added 16.70 points, or 0.19%, to 8,632.88.
The dollar index fell 0.01%, with the euro up 0.02% to $1.1094. The Japanese yen strengthened 0.02% versus the greenback at 108.69 per dollar.
The British pound, a high-flier of late, dropped from a seven-month peak after an opinion poll projected a narrowerthan-expected victory for the Conservative party in the British election. The election is set to decide how the UK will leave the European Union, if at all.
The European Central Bank will hold its first meeting and news conference with Christine Lagarde as president on Thursday.
Benchmark 10-year US Treasury notes rose 6/32 in price to yield 1.8104%.
Oil prices fell after US crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories also rose, data from industry group the American Petroleum Institute shows.
Brent futures slid 89 cents to $63.45 a barrel. West Texas Intermediate crude slipped 68 cents to $58.56 a barrel.
Gold rose as the US-China trade deadline approached. Spot gold added 0.6% to $1,472.26 an ounce.
US
The Dow Jones index was pressured by losses in Boeing and Home Depot on Wednesday, while the S&P 500 and the Nasdaq held on to gains as traders awaited the Federal Reserve’s December policy statement for clues on the strength of the domestic economy.
The US central bank is widely expected to keep borrowing costs steady in its policy announcement, due at 2:00 pm ET (1900 GMT). Markets are also awaiting Fed Chair Jerome Powell’s outlook on the economy when he holds a news conference later in the day.
Stocks have stalled so far in December after three straight months of gains, hurt by worries over a delay in the signing of an interim US-China trade deal and global growth concerns.
President Donald Trump has just days to decide whether to impose levies on nearly $160 billion in Chinese goods.
“The cautionary thing is that we’ve seen these bits of news and eventually had tariffs raised. So we are definitely not out of the woods on trade policy,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
The Dow Jones Industrial Average was down 30.79 points, or 0.11%, at 27,850.93, hit by a 1.5% drop in shares of Boeing Co after the Federal Aviation Administration (FAA) confirmed it would not allow the grounded 737 MAX to resume flying before the end of this year.
Also dragging the index lower was Home Depot Inc, which fell 1.7% as the home improvement chain forecast fiscal 2020 sales growth below Wall Street expectations.
In contrast, the S&P 500 was up 4.24 points, or 0.14%, at 3,136.76 and the Nasdaq Composite was up 17.02 points, or 0.20%, at 8,633.20.
UK
UK-listed firms exposed to political risks edged lower on Wednesday as investors were nervous about a growing chance that the election may result in another hung parliament, while JD Sports slid 9% after the retailer’s top investor cut its stake.
Meanwhile, the exporter-heavy FTSE 100 gained 0.2% led by pharmaceutical firm GlaxoSmithKline and miners as sterling weakened, outshining the benchmark European index.
The mid-cap bourse, which makes half of its earnings from Britain, was down 0.1% by 0840 GMT. The index has gained about 3% and outperformed bluechips since lawmakers voted in favour of an election to break the deadlock over Brexit.
Stocks considered most vulnerable to any shocks to the British economy weakened across the board, with falls in bluechip housebuilders Barratt and Taylor Wimpey . Real estate stocks weighed the most on mid-caps.
Investors also awaited a statement from the rate-setting meeting by the US Federal Reserve to gauge the outlook for the world’s largest economy amid a prolonged trade war with China.
Corporate headlines drove some moves.
Europe
European shares were a bit lower on Wednesday as investors intently waited for a pivotal British election on Thursday to decide the fate of Brexit, with attention also focused on central bank meetings in the United States and euro zone this week.
The pan-European STOXX 600 index ticked down 0.2% in volatile trading.
The benchmark European index scaled four-year peaks in the past two months on optimism around an eventual departure for Britain from the European Union as well as hopes of a resolution to the US-China trade war, but sentiment has lately been dampened by conflicting headlines on both.
The trade-sensitive German index has turned negative in December after rising for three months in a row as a Sino-US trade deal remains elusive ahead of the next round of US tariffs on Chinese imports due on Dec 15.
While the latest reports suggest tariffs would be postponed, it could take until 2020 before both sides can agree on an initial trade deal.
Germany’s export heavy DAX was flat after earlier rising as much as 0.6%, while trade-sensitive autos and miners were among the few advancers of the day.
The spotlight will shine on the US Federal Reserve policy meeting later on Wednesday, where the central bank is expected to keep rates unchanged after trimming them three times this year. The first policy meeting led by new European Central Bank President Christine Lagarde on Thursday will also be closely watched.
Britain’s biggest sportswear retailer JD Sports fell 9.1%, heading for its worst day in more than three years after its largest shareholder, Pentland, sold a part of its stake.
Asia
Asian stock markets were mostly higher Wednesday following reports President Donald Trump might delay a weekend tariff hike on Chinese goods.
Benchmarks in Shanghai, Hong Kong and Southeast Asia rose while Tokyo declined.
The Shanghai Composite Index rose 0.1% to 2,920.85 and Hong Kong’s Hang Seng gained 0.3% to 26,522.89. Tokyo’s Nikkei 225 shed 0.2% to 23,365.94.
South Korea’s Kospi gained 0.4% to 2,103.82 and Sydney’s S&P-ASX 200 added 0.6% to 6,744.80. India’s Sensex opened 0.3% higher at 40,376.90. Taiwan and Singapore advanced while New Zealand retreated.
Oil
Oil prices fell on Wednesday after industry data showed an unexpected build-up of US crude inventories and as investors waited to see if a fresh round of tariffs by Washington on Chinese goods would come into force on Sunday.
Brent futures fell 34 cents to $64 per barrel by 1430 GMT. West Texas Intermediate crude slipped 21 cents to $59.03 a barrel.
US crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories also rose, data from industry group the American Petroleum Institute shows.
Crude inventories rose by 1.4 million barrels in the week to Dec 6 to 447 million. Analysts were expecting a fall of 2.8 million barrels.
Government data from the weekly US Energy Information Administration (EIA) report is due at 1530 GMT.
US-China trade tensions continue to cloud the outlook for demand, with a Dec 15 deadline for the next round of US tariffs on Chinese imports approaching.
On the supply side, the US is on track to become a net exporter of crude and fuel for the first time since records began on an annual basis in 2020, the EIA said, due to a production surge that has dramatically reduced its dependence on foreign oil.
Also adding to global supply, US producers Exxon Mobil Corp and Hess Corp plan to export the first shipments of crude from Guyana between January and February, sources said.
Currencies
The pound inched higher on Wednesday in very thin trading, shrugging off an opinion poll for Britain’s election that showed the ruling Conservative Party might fail to win a majority.
The narrowing of the Conservative’s lead just a day before the vote has cast some doubt on the expectations of a definitive outcome that have boosted sterling in recent weeks.
The British currency was last up 0.2% at $1.3180, not far from the eight-month high above $1.32 it hit on Tuesday. Against the euro, it rose by the same amount to 84.15 pence but remained below Monday’s 2-1/2 year high of 83.94.
A closely watched model from pollsters YouGov put Prime Minister Boris Johnson on course to win a majority of 28 in parliament on Thursday, down from a forecast of 68 last month. YouGov also said its model could not rule out a hung parliament, where no party gains a majority.
The pound has rallied in recent months on growing expectations the Conservatives would gain an outright majority, helping them pass a withdrawal deal with the European Union that was agreed in October - and ending 3-1/2-years of uncertainty.
Leveraged funds held $2.44 billion in net short positions on the pound in the week to Dec 3, CFTC data showed, and analysts said there is still room for those positions betting on a fall in sterling to be unwound, which could drive the pound higher.
With the market betting on some sort of Conservative majority, a hung parliament could hit sterling hard, pushing it down to $1.26, according to ING analysts.
Gains in the event of a Conservative majority are expected to be less pronounced, since this outcome has largely been priced in, according to ING analysts. They expect the pound to rise to $1.35 if there’s a large Conservative majority and $1.33 if they have only a slender majority.
A majority for the main opposition Labour Party – considered unfavourable to markets – could push sterling down to $1.24, ING analysts said.