Global Market Report - January 18

Reports of possible trade concessions towards China by the US are helping world equities end the week strongly

Morningstar 21/01/2562

Global Market Report

Asia

Apparent concessions by the US Government towards China gave markets in Hong Kong, mainland China and Japan a 1% boost today. China’s Shanghai Composite Index is having a positive January after a 2018 to forget, with a gain so far this year of over 5%.

Japanese inflation for December came in as expected at a rise of 0.3% on the year. A softening in the yen, as global investors sought out riskier assets, helped the cause for Japanese equities.

Europe

The broad-based global rally helped markets in Europe out of their recent doldrums. Most major Eurozone indices were up over 1% on the day, with Germany’s DAX moving back above 11,000 points.

The FTSE 100 was up 1% to just above 6,900 points, helped again by listed housebuilders, which are continuing their strong run. The FTSE 100’s move from late December around 6,500 points to 6,900 now is in spite of some currency headwinds, with sterling getting a boost this week from Theresa May’s Commons defeat. Still, the pound seems rooted at $1.29 when $1.30 seeming a tricky hurdle to overcome. Worse-than-expected retail sales data didn’t help, and confirmed the troubles faced by high street and online stores in recent months.

North America

US stock futures point to a rise on Wall Street today, helped by reports that US Treasury Secretary Steve Mnuchin is planning to lift tariffs on Chinese goods. The reports helped swing sentiment back in favour of the narrative that trade talks are moving in the right direction. A potential criminal probe into Huawei could always upturn this positivity, however. While the US Treasury denied the reports, they suggest that the administration is concerned that December’s equity sell-off could be repeated.

The stock reaction to Morgan Stanley’s (MS) results shows that the start of earnings season has not been plain sailing for Wall Street’s investment houses. Goldman Sachs (GS) was rewarded with a near 10% gain, but Morgan Stanley dropped nearly 5% yesterday after bond trading and wealth management fell short of expectations.

Tech earnings are due at the end of the month. Netflix (NFLX) is the first of the FAANGs to report. Despite posting strong subscriber growth, with 8.8 million new subscribers added, the share price backtracked in pre-market trading. At the same time, the shares are up around $20 this week after the company pushed through a price rise and are up over 50% since their December low.

Canadian inflation numbers are due on Friday. After the market opens on Friday, the University of Michigan sentiment index for January is released. Oil prices are at one-month highs amid continuing OPEC production cuts – Brent crude is close to $62 per barrel and WTI is over $52.

 

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