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The Monday Market Minute

  • Global stocks drift lower in thin volumes as lunar new year celebrations keep many markets in Asia closed for the week and investors continue to focus on the surprising underlying strength of the U.S. economy.
  • Oil prices hit the highest levels of 2019 amid the twin pressures of slowing global supply and last week's sanctions on the sale of Venezuelan crude to the United States.
  • U.S. earnings season hits the mid-way point ahead of schedule, with December-quarter profits growing 18%, but first quarter growth is set to slow to around 0.7% as the impact of tax cuts fades.
  • U.S. equity futures suggest modest declines on Wall Street ahead of earnings from Google parent Alphabet after the bell and updates from Clorox, Gilead and Newell Brands.

Market Snapshot

Global stocks opened the trading week modestly lower Monday, with markets in Asia largely shut for the region's annual lunar new year celebrations, and investors focused on the stronger-than-expected data from the United States last week that continues to support solid growth in the world's biggest economy.

Liquidity was thin in the overnight session owing to many markets in Asia being closed for the holiday observances, which will keep markets in China shuttered for the entire week and bourses in South Korea out of action until Thursday. Japan's Nikkei 225 slipped 0.46% in quite volume Monday to close out the session at 20,833.77 points. while the region-wide MSCI ex_Japan benchmark drifted 0.12% after touching a four-month high last week.

Early indications from U.S. equity futures suggest a softer start the week on Wall Street, as well, with contracts tied to the Dow Jones Industrial Average indicating an 18 point dip and those linked to the S&P 500 guiding to a modest 1 point bump to the downside.

European stocks were similarly uninspired as trading kicked-off in Frankfurt and London, with the region-wide Stoxx 600 marked 0.03% lower in the opening two hours and Britain's FTSE 100 added 0.19% in quite trading volumes. 

Corporate earnings will resume center stage for U.S. markets again this week as we reach the mid-point of the December quarter earnings season modestly ahead of expectations in terms of bottom line performance for S&P 500.

With around 234 companies reporting as of Friday, earnings have grown by around 18% from the final three months of 2017, with revenues rising 6.4%. Both figures are modestly ahead of early-season forecasts of 15.5% and 5.6% respectively, but first quarter 2019 earnings growth is set to slow to just 0.7% -- compared to 26.6% in the first quarter of last year -- and only improve to 3.8% in the three months ending in June.

Those numbers contrast what appears to be a still-expanding domestic economy, which added 304,000 news jobs last month, the best in nearly a year, and saw a key reading of manufacturing activity jump 2.5 points to 56.6 points as new orders surged and domestic production expanded.

The readings added upward pressure on U.S. government bond yield, which held in place during the overnight session as benchmark 10-year notes traded at 2.702% and 2-year notes were pegged at 2.52%.

Global oil prices were perhaps the most significant-moving asset class in the early European session, with Brent crude prices rising to the highest levels of 2019 as investors factor in the impact of U.S. sanctions on the sale of Venezuelan crude and data from oil services group Baker Hughes which showed the number of U.S drilling installations at the lowest level in eight months.

Reuters also reported supply from OPEC members fell the most in two years last month to 30.98 million barrels per day.

Brent crude contracts for April delivery, the global benchmark, were marked 68 cents higher from their Thursday close in New York and changing hands at $63.43 per barrel while WTI contracts for March were seen 37 cents higher at $55.63 per barrel.