The Tuesday Market Minute
- Global stocks trade higher as investors eye progress in U.S. China trade talks, but weaker-than-expected Samsung profit forecast rattles tech markets.
- Samsung cites softer China demand as it tees-up an 11% fall in fourth quarter sales and smaller-than-expected profits in a "stagnant and fiercely competitive smartphone market" smartphone market.
- European stocks open higher, but sentiment remains cautious amid Brexit uncertainty and weakening German industrial output that could signal recession risk.
- U.S. stocks set to open modestly higher, with S&P 500 futures indicating an 21 point advance, ahead of trade and JOLTS employment data.
Global stocks traded higher Tuesday, with investors again focused on progress in U.S.-China trade talks, but a weaker-than-expect profit forecast from Samsung Electronics (SSNLF) added further concern over the health of the tech sector and capped gains in Asia.
U.S. and Chinese officials met for a second day of talks in Beijing Tuesday, with comments from both sides suggesting cautious optimism that a deal on trade can be struck ahead of the March 1 deadline established by Presidents Donald Trump and Xi Jinping last month at the G20 summit in Argentina.
China's impetus to reach a conclusion with its biggest export market, however, may be more compelling now that its economy is firmly mired in a slowdown and its currency is at risk of drifting even lower against the U.S. dollar. In fact, China's foreign exchange reserves, which is hoards as part of its enormous trade surplus with economies around the world, fell for the first time in four years last year -- by $67.24 billion -- as the cost of defending the yuan increase.
China's slowdown, which was cited by Apple Inc. (AAPL) - Get Report last week as the catalyst for its shock cut in current-quarter revenue forecasts, was also evident in weaker-than-expected sales and profits from its main rival, Samsung Electronics, which said revenues would fall by 11% over the October to December period and profits would miss analysts forecasts by around $2.2 billion.
South Korea's other tech giant, LG Electronics, also posted a much weaker-than-expected fourth quarter profit forecast Tuesday, sending shares lower and raising deeper concerns for the health of the consumer electronics sector.
The surprise forecast push Samsung to a 1.7% decline and clipped gains for both South Korea's KOPSI and the broader Asia stock complex, with the MSCI ex-Japan index marked 0.17% lower after a solid 0.82% gain for the Nikkei 225 in Tokyo.
U.S. equity futures slipped modestly lower following the Samsung numbers, with contracts tied to the Dow Jones Industrial Average I:DJI indicating a 250 point gain and those linked to the S&P 500 I:GSPC suggesting a 24.1 point bump higher for the broader benchmark.
Union Pacific Corp. (UNP) - Get Report shares were indicated sharply higher in pre-market trading Tuesday after the railway operator said industry veteran Jim Vena would join the company later this month, less than two years after ending a four decade career with rival Canadian National.
Union Pacific shares were marked 6.9% higher in pre-market trading Tuesday, indicating an opening bell price of $148.20 each, a move that would trim the stock's three month decline to around 9.9% and value the Omaha, Nebraska-based industrial at just under $110 billion.
European stocks were pegged higher at the start of trading, as well, with the Stoxx 600 rising 1.06% even as investors remain focused on the developments in Britain, where Prime Minister Theresa May continues to struggle to find support for her proposed withdrawl agreement ahead of next week's parliamentary vote.
Sentiment was further blunted by a weaker-than-expected reading for industrial production from Germany, the region's biggest economy, where output fell by 1.9% in November, extending a run of three consecutive months and raising the real prospect of the economy tipping into recession over the fourth quarter.
Away from equities, the U.S. dollar index continued to drift lower against a basket of its global peers as investors alter their expectations for rate hikes from the Federal Reserve following last week's dovish tilt from Chairman Jerome Powell.
The dollar index hovered at around 95.88 in early European trading even as benchmark 2-year note yields rose 2 basis points to 2.541%, a move that takes them more than 10 basis points from last week's low despite no change in rate hike prospects from Fed Funds futures prices.
Global oil prices edged higher in overnight and European trading, helped by the weaker dollar and a Wall Street Journal report that Saudi Arabia will trim its January exports by around 7.1 million barrels per day by the end of this month.
Brent crude contracts for March delivery, the global benchmark, were marked 94 cents higher from their Monday close in New York and changing hands at $58.27 per barrel while WTI contracts for February were marked 80 cents higher at $49.28 per barrel.