4 Things to Know in the Markets

Via: @BrianSozzi

Market Snapshot

Global stocks slipped Tuesday as softer-than-expected data from two of the world's biggest economies raised the prospect of a slower second quarter and investors waited for the next round of trade talks between the U.S. and China to kick-off later today in Washington.

Early indications from U.S. equity futures also point to a modest pullback at the opening bell on Wall Street, with the Dow Jones Industrial Average  pointing to an implied decline of 160 points while the broader S&P 500  is set to fall 15.25 points at the start of trading Tuesday.

A good portion of the Dow's downside move came from Home Depot (HD) ,which posted stronger-than-expected first quarter earnings Tuesday but noted that same-store sales were hit by the colder winter temperatures that have also impacted activity in the key spring period.

Home Depot shares were marked 2.8% lower in pre-market trading immediately following the release, indicating an opening bell price of $185.60 each, a move that would tip the stock into negative territory for the year.

With the Dow riding an eight-session winning streak, however, investors might be tempted to book profits Tuesday after the U.S. dollar index, a measure of the greenback's strength against a basket of six global currencies, jumped to to 93.03 -- the highest level since December 27 -- following a sustained move over the 3% barrier for benchmark -- to 3.0355% -- 10-year U.S. Treasury yields. 

Investors might also be cautious in adding to equity market gains after a set of modestly disappointing economic readings from Germany and China today, with the latter reporting relatively weaker-than-forecast retail sales for the month of April is a slew of economic releases Tuesday, with activity rising 9.4% from the same period last year against a consensus estimate of 10%. New home sales, a sector of the world's second-largest economy that is growing in importance, fell for the first time in six months.

The weakness could put an even greater emphasis on the start of the second round of trade talks between the U.S. and China, which begin today in Washington with the two sides still "very far apart" on key issues such as intellectual property protections and agricultural tariffs, according to America's China Ambassador Terry Branstad.

"There are many areas where China has promised to do but haven't. We want to see a timetable. We want to see these things happen sooner or later," Branstand said during an event in Tokyo.

Trade negotiations are continuing with China. They have been making hundreds of billions of dollars a year from the U.S., for many years. Stay tuned!

— Donald J. Trump (@realDonaldTrump) May 15, 2018

Economic growth in the Eurozone was also modestly disappointing, with first quarter GDP expansion estimated at 0.4%, a sharp slowdown from the 0.7% pace recorded in the final three months of last year. 

"The data flow for the Eurozone is not bad, but it's also not so great anymore," said ING economist Peter Vanden Houte. "All in all, the weaker first quarter might be the new normal."

Germany's Federal Statistics Office said the region's biggest economy slowed to a growth rate of 0.3% in the first quarter, down from 0.6% in the final three months of last year and missing analysts' forecasts of a 0.4% reading. The pace of growth, the slowest in nearly two years, suggests that not only is the region's recovery starting to lose momentum, but also that the European Central Bank will need solid evidence of an upturn before it makes any sharp changes to its policy of record low rates and quantitative easing.

https://t.co/sHUMFaoojG GERMAN GDP: NEAR-TERM DENT, BUT UNDERLYING TREND HEALTHY #macro pic.twitter.com/ZYuGlgx2j8

— Berenberg Economics (@Berenberg_Econ) May 15, 2018

Europe's Stoxx 600 index, the broadest measure of regional share prices, gained 0.26% by mid-day in Frankfurt while Britain's FTSE 100 rose  0.49% higher in London on the strength of industrial and financial sector stocks and a weaker pound, which fell to 1.3518 against the resurgent U.S. dollar.

Vodafone Plc (VOD) was one of the European region's notable early movers, with shares falling more than 3.4% at the start of trading following news that Vittorio Colao will step down as CEO after nearly 10 years at the helm of the world's second-largest mobile phone operator. On the upside, Easyjet Plc  (ESYJY)  led European gainers with a 3.2% advance after the low-cost airline posted a narrower-than-expected first half loss and said it would expand its package holiday offering. 

Commerzbank AG  (CRZBY) was another active stock, with shares in Germany's second-biggest bank rising 3.1% after it beat Street forecasts in its first quarter earnings even as profit and revenues fell from the same period last year amid weaker European markets.

The European moves followed a weaker session for Asia stocks, where the MSCI Asia ex-Japan index fell 0.86% and the Nikkei 225 gave back 0.21% by the close of the session.

Global oil prices extended gains Tuesday, with investors shrugging off the overnight strength in the U.S. dollar and the softer German and China data to add 71 cents a barrel to Brent crude futures for July delivery, the global benchmark, which were changing hands at at $78.94 in early New York dealing. WTI contracts for June gained 55 cents a barrel to $71.51.