Global shares: US flat to down; Europe firm; Asia mixed

United States

US equities were flat to lower Tuesday after mixed corporate earnings reports and anticipation of Wednesday's US-China trade pact. The Dow industrials rose 0.1 percent, the S&P 500 declined 0.2 percent as did the NASDAQ.

Risk assets retreated from earlier highs after a Bloomberg story in midafternoon repeating that existing US tariffs on Chinese goods would remain in place until after November, and noting that US tariff cuts hinged on Chinese compliance in the trade accord. Other reports said the trade deal would call for large Chinese purchases of US oil, manufactured goods, and farm goods.

Among sectors in the S&P 500, financials and industrials led the gains, while energy, REITs, and technology lagged.

Among companies in the news, Dow member JP Morgan Chase rose 1.1 percent as its earnings and revenues topped expectations, led by trading revenues. Citigroup gained 1.6 percent after an earnings and revenues beat, led by interest income and strong growth in its consumer business. Delta Airlines rallied 3.3 percent as its traffic, profits, and revenues came in unexpectedly high. On the downside, Wells Fargo fell 5.4 percent after an earnings miss. Boston Scientific, the medical device maker, dropped 6.2 percent on a weak fourth-quarter sales update.

In US economic news, the CPI is not pointing to building momentum for inflation. December's CPI managed only a 0.2 percent gain which was 1 tenth shy of Econoday's consensus, while CPI excluding food and energy likewise missed expectations with only a 0.1 percent gain. Year-on-year, the overall reading rose 2 tenths to 2.3 percent with the core holding at 2.3 percent. These readings hit expectations.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 50 cents to US$64.64, while gold fell US$4.50 to US$1,546.80. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield fell 3 basis points to 2.27 percent while the 10-year note yield fell 4 basis points to 1.81 percent.


European equities were flat to firmer Tuesday, with support from luxury stocks. The Europe-wide STOXX 600 rose 0.3 percent, the German DAX rose 0.04 percent, the French CAC gained 0.1 percent while the UK FTSE-100 also gained 0.1 percent.

Markets were awaiting details from the US-China trade pact announcement scheduled for Wednesday in Washington, D.C. EU Trade Commissioner Phil Hogan is also due in Washington, D.C., this week to discuss US-EU trade disputes.

Among sectors, travel & leisure, personal & household goods, and construction materials outperformed, while oil & gas, autos, and technology lagged.

Strength in luxury stocks gave the market a lift after a UBS upgrade. LVMH, the French luxury goods conglomerate, rose 1 percent. UK homebuilder Taylor Wimpey gained 3.9 percent after it raised its guidance for 2020. On the downside, oil stocks eased as oil prices declined, with BP off 0.3 percent. Dialog Semiconductor, the UK chipmaker, fell 3.4 percent after a disappointing fourth quarter report.

Asia Pacific

Major Asian markets posted mixed results Tuesday, with the regional data calendar providing limited guidance to investor sentiment. Ahead of the signing of phase one of a US-China trade deal later in the week, Chinese trade data showed stronger imports growth in December while US authorities revoked their designation of China as a currency manipulator. Australia's All Ordinaries index outperformed with an increase of 0.8 percent on the day. while Japan's Nikkei and Topix indices advanced 0.7 percent and 0.3 percent respectively. The Shanghai Composite index fell 0.3 percent while Hong Kong's Hang Seng index closed down 0.2 percent.

China's trade surplus in US dollar terms widened from US$38.73 billion in November to US$46.79 billion in December. Exports rose 7.6 percent on the year in December after falling 1.3 percent in November, while imports rose 16.3 percent on the year after advancing 0.5 percent previously. Annual data showed China's exports rose 5.0 percent in 2019 while imports rose 1.6 percent.

India's wholesale price index increased by 2.59 percent on the year in December, up sharply from 0.58 percent in November. The index advanced 0.41 percent on the month after increasing 0.08 percent previously. The increase in WPI inflation largely reflected a stronger increase in food prices, which account for around 15 percent of the index. These rose 13.24 percent on the year in December after increasing 11.08 percent in November. CPI data published earlier in the week showed an increase in headline consumer inflation from 5.54 percent in November to 7.35 percent in December.

Looking ahead*

On Wednesday in Europe, the following reports are scheduled: French CPI, UK CPI and PPI, Eurozone industrial production and merchandise trade. In North America, releases are scheduled for the following: PPI-FD, Empire State manufacturing, Atlanta Fed business inflation expectations, and the EIA petroleum status report.

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