Global Market Report - January 29

A new twist in the Huawei saga has set the tone for a nervous day in global markets as Apple kicks off the tech earnings season

Morningstar 30/01/2562

Global Market Report

Asia

China and Hong Kong markets closed marginally down on Tuesday, tracking weakness overnight on Wall Street. Japan’s Nikkei 225 crept higher after yesterday’s yen-related weakness.

News that US prosecutors are charging Chinese mobile firm Huawei with spying has disturbed the consensus that trade negotiations are moving in the right direction, particularly with the Chinese delegation visiting Washington this week. China has rejected the charges in language that echoes the height of the trade war last year, accusing the US of attempting to “kill” off Chinese businesses.

Perhaps the Huawei developments will hit Asia markets harder when they re-open on Wednesday, especially if US equities soften again. Chinese New Year is looming and traders are unlikely to want to hold open positions ahead of five working days off for China and three in Hong Kong.

Europe

The pound was softer ahead of the key Brexit vote in the House of Commons today, lifting the FTSE 100 while other European stock markets were under pressure. Defensive stocks were on the up, with tobacco firm British American Tobacco (BATS) the leader. Royal Mail Group (RMG) led the fallers with a drop of nearly 12% after it updated the market, saying that a decline in letter volumes is holding back revenues.

The company’s share price has more than halved since last May.

By 10am the FTSE 100 was up over 1% to move back above the 6,800 points level it dropped through yesterday. After early weakness, France’s CAC 40 moved back into positive territory, while Germany’s DAX was off just 0.1%.

North America

Today Apple (AAPL) initiates the tech earnings season, with the iPhone maker releasing numbers after the closing bell on Tuesday. Microsoft (MSFT) reports on Wednesday and Facebook (FB) updates investors on Thursday.

Nvidia’s (NVDA) share price crash yesterday has put investors in high-growth, high-share price companies on edge.

The Federal Reserve is set to meet this week for the first time this year, and although no change to interest rates is expected, any forward-looking statements about the path of monetary policy will be pounced on by investors. The market consensus is for the Fed to proceed cautiously this year, especially with growth expected to tail off.

There’s plenty of economic data to support or contradict this narrative, not least fourth quarter GDP on Wednesday and Durable Goods Orders and Consumer Confidence figures on Tuesday. The US economy is expected to have expanded by 2.6% in the fourth quarter on an annualised basis, lower than in the third quarter.

Closing off a busy week will be January’s non-farm payroll numbers on Friday.

 

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