Global equities traded mixed overnight as investors deal with some disappointing economic signals this month, along with a plethora of central banks decisively turning towards accommodation — shying away from rate normalization for the foreseeable future.
A number of sovereign yields have plummeted to new year lows while risk aversion trading strategies have tended to dominate.
U.S.-China trade talks later this week remain a focus along with Brexit. U.S. recessions fears are being stoked by the inversion of three-month and 10-year T-bill yield curve.
Wednesday's proceedings are dominated by British Parliament, which is attempting to break its Brexit deadlock with votes on alternatives to Prime Minister Theresa May's divorce deal with the E.U.
With all this in mind, here are five things the global markets were talking about on Wendesday.
1. Stocks Post Mixed Results
In Japan, the Nikkei fell overnight, pressured by companies going ex-dividend. The Nikkei share average ended down 0.2 percent, while the broader Topix dropped 0.5 percent. The Japanese market has been very volatile this week, tumbling 3 percent on Monday and rebounding on Tuesday. Investor sentiment has been hit hard by fixed income concerns about a possible U.S. economic recession due to the partial inversion of the U.S. yield curve.
Down-under, Kiwi shares rallied to a record high overnight after the Reserve Bank of New Zealand (RBNZ) blindsided the market by raising the possibility of a rate cut as its next move, while in Australia the materials sector helped its market eke out modest gains. New Zealand's benchmark S&P/NZX 50 index climbed 1.3 percent, while in Australia, the S&P/ASX 200 index inched about 0.1 percent higher at the close.
In South Korea, the Kospi index fell slightly as foreigners booked profit from the previous session. The index ended down 0.15 percent.
In China and Hong Kong, stocks closed higher following two straight sessions of losses on a rebound Tuesday stateside aided investor sentiment, while weak industrial profit data fuelled hopes for more stimulus. The blue-chip CSI300 index closed 1.2 percent higher, while the Shanghai Composite Index gained 0.9 percent. In Hong Kong, the Hang Seng advanced 0.6 percent.
2. Oil Prices Mixed As Demand Concerns Cloud Outlook
Oil prices were trading mixed Wednesday morning. Brent extended Tuesday's rise, yet was capped by growing fears over the impact of a global economic slowdown on consumer demand.
Brent added 0.2 percent, to $68.13, and is not far off its year-to-date high of $68.69 reached last week. U.S. crude futures were down slightly at $59.91.
Oil rallied during Tuesday's session following a massive power blackout at Venezuela's main oil export port of Jose on Monday — it was the second in a month.
Crude oil is on course for its best quarter in a decade, with the latest jump coming after Russian Energy Minister Novak indicated that Russia will reach its pledged output cut of 228K bpd by the end of March.
Oil prices have been supported for much of this year by efforts of OPEC+, which has pledged to withhold around 1.2M bpd of supply this year to prop up markets.
3. Central Banks Dovish Messages Continue
Overnight, the Reserve Bank of New Zealand (RBNZ) left their official cash rate (OCR) unchanged as expected at 1.75 percent. The accompanying statement indicated that the next rate adjustment is "down" as opposed to the prior statement that the "next move in official cash rate could be up or down." Following the statement, money markets are currently pricing in a rate cut for next November 2019 versus June 2020. New Zealand two-year yield have declined over 10 bps.
Germany's 10-year Bund yield has fallen again, as the drop below zero accelerates. German 10's fell over 3 bps to -0.048 percent against a backdrop of worries about global growth from China to the U.S. Across the euro area, 10-year bond yields are down 2-3 bps. They have fallen since the European Central Bank pushed back its guidance for a rate increase and flagged a fresh round of cheap bank loans earlier this month .
4. Kiwi Crushed, Sterling Little Changed
Australasian currencies, especially the NZD came under immense market pressure overnight, sinking to a new two-month low (NZD down 1.3 percent outright) after the RBNZ joined other main central banks in a global dovish theme by indicating that its next interest rate move will be "down." In sympathy the AUD has been dragged lower to just shy of A$0.7100.
Sterling was trading flat and is expected to remain in tight range as Parliament outlines their preferred options on the path of Brexit. From those outlined options the most popular will be picked for a run-off process which is to follow early next week. Then the most popular options among those picked should be selected and provide guidance for the future Brexit path and negotiations with the E.U.
5. China's Industrial Profits Shrink Most In 8 Years
Data overnight from China showed that industrial firms posted their worst slump in profits in eight-years for the first two-months of this year. Increasing strains on the world's second largest economy, like slowing domestic and foreign demand took a toll on businesses.
According to the National Bureau of Statistics (NBS), profits for January-February fell 14 percent annually to ¥708.01B — the biggest contraction since October 2011.
Data like this would suggest that China could see further trouble. Already, the government has lowered the economic growth target for 2019 to 6.0-6.5 percent, from the actual rate of 6.6 percent last year.
Digging deeper, analysts said the drag profits was mainly due to price contractions in key industrial sectors such as auto, oil processing, steel and chemical industries.
Related Links:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
