The Tuesday Market Minute
- Global stocks edge higher, taking the MSCI World index to a two-month high, as U.S economic data and corporate earnings offset concerns over China trade talks.
- Fed Chair Powell meets with President Donald Trump, statement stresses data dependence on rate moves.
- BP shares jump 4%, leading European energy stocks higher, after stronger-than-expected fourth quarter earnings and a boosted dividend.
- Oil prices bump higher on supply concerns linked to OPEC output slump, Venezuelan sanctions.
- U.S. equity futures suggest moderate gains on Wall Street ahead of earnings from Viacom, Estee Lauder, Ralph Lauren and Skyworks, with Disney set to update at the close of trading.
Global stocks edged higher again Tuesday in quiet overnight trading, lifting the broadest measure of world stocks to the highest level in two months, as investors continue to favor the robust U.S. economic data over concerns for the fate of trade talks with Beijing.
Equity market bulls were given further fuel to take stocks higher after an unscheduled meeting late Monday in Washington between President Donald Trump and Federal Reserve Chairman Jerome Powell reaffirmed the central bank's signalling of a pause in near-term interest rate hikes.
The 90-minute dinner, which included Treasury Secretary Steve Mnuchin and Fed Vice Chairman Richard Claria, was held "at the President's invitation", according to a Fed statement issued shortly afterwards, in order to "discuss recent economic developments and the outlook for growth, employment and inflation."
The Fed Chair "did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook," the Fed said. "Chair Powell said that he and his colleagues will make those decisions based solely on careful, objective and non-political analysis."
The dovish tone could be coupled by bullish remarks on U.S. trade talks later this evening when President Trump delivers his delayed State of the Union address to Congress, which comes less than a month ahead of the self-imposed March 2 deadline for a conclusion.
With the S&P 500 closing at a two-month high of 2,724.87 points, and now 15.9% from its Christmas Eve trough, investors were content to take global stocks higher in overnight trading despite the thin liquidity in the Asia region owing to this week's series of Lunar New Year celebrations, which will keep many markets closed until at least Thursday.
Japan's Nikkei 225 was the regional outlier, slipping 0.19% to close at 20,844.50 points, but the MSCI ex-Japan index added 0.46% while Australia's ASX index jumped 2% for its biggest gain in two years after a tepid report on the country's financial services industry from regulators and no change in interest rate policy from the Reserve Bank of Australia.
Early indications from U.S. equity futures suggest a modest pullback on Wall Street at the start of trading Wednesday, with contracts tied to the Dow Jones Industrial Average
Alphabet Inc. (GOOGL) shares extended declines in pre-market trading, falling 3.1% to $1,106.00 each, after the parent company to tech giant Google posted stronger-than expected fourth quarter revenue growth thanks to a surge in ad sales but failed to ease investor concerns over rising costs in some of its growth businesses.
Earnings on tap for the Tuesday session include Viacom (V) , luxury goods brand Estee Lauder (EL) and Ralph Lauren (RL) , gaming group Electronic Arts (EA) and chipmaker Skyworks (SWKS) . Walt Disney Co. (DIS) will update investors after the close of trading.
With around half of the S&P 500 reporting December quarter profits to date, collective earnings per share have grown by around 18% compared to the same period last year, just ahead of the 15.5% estimate for the entire reporting season thanks to stronger-than-expected numbers from bluechips such as Facebook (FB) , Exxon Mobile (XOM) and Boeing (BA) .
Just under 71% of companies have reported earnings that have beaten analysts' estimates, according to Refiniitv data, a figure that is firmly ahead of the long-term average of 64% but also well below the 78% recorded over the past four quarters.
The gap in profitability between the US and the rest of the world remains striking. Ex tax benefits Q4 US #earnings rose 4.9% YoY so far, whereas earnings in the rest of the world are falling more than 7%. pic.twitter.com/AGfWrolKMB— jeroen blokland (@jsblokland) February 5, 2019
European stocks bumped higher at the start of trading in Frankfurt, with the Stoxx 600 rising 0.68% on the strength of basic resource and energy stocks by late morning trade.
Britain's FTSE 100 added 1.1% in London after the pound slid to 1.3015 against the U.S. dollar following the weakest reading for Britain's key services sector since the country voted to leave the European Union in the summer of 2016.
U.K. stocks were ed by BP plc (BP) , which rose 4.3% to 542.5 pence each after it posted stronger-than-expected fourth quarter earnings Tuesday, wrapping up a lucrative earnings season for western oil majors, as underlying profits surged from a year ago despite a slump in global crude prices.
Global oil prices were active again Tuesday, with crude rising on the back of both a modestly weaker U.S. dollar and concerns over supply limits linked to the steep January decline in OPEC member output, the most in two years, and the impact of sanctions on the sale of Venezuelan crude into the United States.
Brent crude contracts for April delivery, the global benchmark, were marked 37 cents higher from their Monday close in New York and changing hands at $62.88 per barrel while WTI contracts for March were seen 55 cents higher at $55.11 per barrel.