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The Wednesday Market Minute

  • Global stocks drift lower as investors find little detail on trade and policy from President Donald Trump's State of the Union address.
  • European stocks slide as Germany's powerful manufacturing sector sees a slump in industrial orders and luxury carmaker Daimler cites global trade tariffs as operating profits fall 22%.
  • Oil prices retreat as the dollar rides modest gains and U.S. stockpiles increase amid uncertainty surrounding global demand and the impact of sanctions on the sale of Venezuelan crude.
  • U.S. equity futures suggest a modest pullback on Wall Street ahead of earnings from Eli Lilly, General Motors, Twenty-First Century Fox and Humana. 

Market Snapshot

Global stocks drifted lower Wednesday as investors found little from within President Donald Trump's State of the Union Address to extend recent market gains and worried that the lack of detail on progress in trade talks with China raises the risk of the two sides failing to reach an agreement by their self-imposed March 2 deadline.

The cost of that risk was evident in early European trading, as well, with German reporting a deep 1.6% slump in industrial orders for the month of December, with orders for goods delivered outside of the common currency area down 5.5%. That data was matched by a steep 22% decline in fourth quarter operating profit from luxury carmaker Daimler AG, which saw a 7.3% slump in the return on sales of Mercedes-Benz cars thanks in part to tariffs on cars made in the United States but ultimately sold in China.

We are now making it clear to China that after years of targeting our industries, and stealing our intellectual property, the theft of American jobs and wealth has come to an end," Trump said in his State of the Union Speech. "I have great respect for President Xi, and we are now working on a new trade deal with China. But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs."

Reports suggest U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing next week to resume talks aimed at tackling alleged intellectual property theft, but with a March 2 deadline looming, the risk of tariffs on $250 billion worth of China-made goods -- including clothes, shoes and consumer electronics -- is suddenly a very real concern.

Trump's plea to Congress to pass the United States Reciprocal Trade Act, "so that if another country places an unfair tariff on an American product, we can charge them the exact same tariff on the exact same product that they sell to us", was also seen as a direct broadside to Europe, which applies a 10% levy to U.S.-made cars against the 2.5% level put in place by Washington.

Markets in Asia drifted lower as a result, with the MSCI Asia ex-Japan index marked 0.11% lower heading into one of the quietest trading sessions, in terms of market range, since the Christmas holidays. Japan's Nikkei 225, meanwhile, edged 0.14% lower to close at 20,874.06 points.

European stocks followed suit, with both the German industrial data and Daimler's troubling fourth quarter profits weighing on shares in the region, although the Stoxx 600 benchmark bumped 0.1% higher by mid-day in Frankfurt. Britain's FTSE 100 was on the back foot, falling 0.05% despite persistent weakness in the pound, which fell to 1.2953 against the U.S dollar after the weakest reading for services sector activity for the month of January since the summer of 2016.

Early indications from U.S. equity futures suggest similar weakness at the start of trading on Wall Street, with contracts tied to the Dow Jones Industrial Average indicating a 44-point decline while those linked to the S&P 500 are guiding to a 6 point pullback for the broader benchmark. Nasdaq Composite futures indicate a 28 point decline.

Walt Disney Co. (DIS) shares pared gains in pre-market trading Wednesday after the media company posted stronger-than-expected first quarter earnings but cautioned that its transition to broadcasting its own content on the Disney+ platform would hit its bottom line.

Disney shares were marked 0.59% higher in pre-market trading Wednesday, indicating an opening bell price of $113.33 each, a move that would trim the stock's three-month decline to around 3% and value the Los Angeles, California-based media giant at just over $168 billion.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher at 96.17 as investors added to defensive positions in overnight trading and global oil prices retreated in the wake of increasing domestic U.S. supplies.

The American Petroleum Institute said stockpiles rose by 2.5 million barrels last week to just over 448 million, a modestly bigger-than-expected addition that follows last week's reduction of U.S. drilling installations recorded by oil services group Baker Hughes. 

Brent crude contracts for April delivery, the global benchmark, were marked 22 cents lower from their Tuesday close in New York and changing hands at $61.76 per barrel while WTI contracts for March were seen 16 cents lower at $53.50 per barrel.