Wednesday October 16th

16-10-2019

Stock futures fall as US-China trade deal worries and weak retail sales outweigh solid earnings

U.S. stock index futures were lower Wednesday as sentiment was dampened by persistent trade war fears while the corporate earnings season gained steam. At around 8:31 a.m. ET, Dow Jones Industrial Average futures dipped 41 points, indicating a loss of more than 15 points at the open. S&P 500 and Nasdaq 100 also pointed to slight losses. Futures extended their decline after September U.S. retails sales unexpectedly declined by 0.3%. The Wall Street Journal reported there are questions about how much more in U.S. agricultural products China will actually buy and for how long. These worries come even after China and the U.S. agreed last week to the first phase of a broader trade deal. Meanwhile, Bloomberg News said China wants U.S. tariffs on Chinese goods rolled back before moving forward with the purchases. To top it all off, China threatened to take countermeasures against the U.S. in response to a bill favoring protesters in Hong Kong. The U.S. House of Representatives pass a bill on Tuesday that would end Hong Kong’s special trading status with the U.S. unless the State Department determined found human rights were being respected. These trade-related concerns overshadowed the release of strong quarterly results. Bank of America reported Wednesday better-than-expected earnings and revenue for the third quarter, sending its stock up more than 2% in the premarket. The company’s consumer and banking businesses helped offset slumping trading revenues. United Airlines, meanwhile, rose more than 1% on earnings that topped analyst expectations. The airline also raised its full-year earnings guidance. Bank of New York Mellon also climbed 1.2% as its quarterly numbers beat Wall Street estimates. Stocks rallied on Tuesday as J.P. Morgan Chase, UnitedHealth and Johnson & Johnson sparked an earnings-led rally. Investors also cheered positive developments around Brexit. Officials and diplomats said that differences over the terms of the U.K.’s split from the European Union had narrowed significantly on Tuesday. A crucial two-day summit of EU leaders begins in Brussels on Thursday. It is the last such meeting currently scheduled before the fast-approaching Brexit deadline. The world’s fifth-largest economy is due to leave the EU on October 31 and Prime Minister Boris Johnson has repeatedly insisted he will not request another delay. Major Asia Pacific markets were mixed by the close on Wednesday, as news overnight boosted Brexit optimism. Japan’s Nikkei 225 rose 1.20% to 22,472.92. Sectors across the board did well, with autos, tech and retail carving out significant gains. In South Korea, the Kospi rose 0.71% to 2,082.83. South Korea’s central bank cut its interest rate for the second time in three months on Wednesday, as expected, following its first cut in July. Mainland Chinese stocks declined, with the Shanghai composite down 0.41% to close at 2,978.71 and the Shenzhen component declining 0.40% to 1,635.31. Hong Kong’s Hang Seng index bucked the trend to rise 0.63%, despite fresh political unrest in the city, which saw embattled leader Carrie Lam heckled by pro-democracy lawmakers in parliament. Oil slipped further below $59 a barrel on Wednesday, pressured by concerns about weaker demand for fuel due to slower economic growth and forecasts of a further rise in U.S. crude inventories. Signs from the Organization of the Petroleum Exporting Countries that further curbs to oil supply could come in December lent support, as did wider market optimism about a potential Brexit deal. Brent crude, the global benchmark, slipped 12 cents to $58.62 a barrel. U.S. crude gained 2 cents to $52.83. Gold held steady on Wednesday after dropping nearly 1% in the last session, as European stocks slipped on uncertainties surrounding Britain’s departure from the European Union, while palladium hit a new high on tight supplies. Spot gold was up 0.1% at $1,482.84 per ounce. U.S. gold futures were up 0.2% at $1,486.20.