Global Stocks Waver Ahead of Fed Minutes
May 22 2019 - 8:26AM
Dow Jones News
By Nathan Allen
U.S. stocks were set to open slightly lower Wednesday as markets
awaited the release of Federal Reserve minutes that could shed
light on officials' views on lowering interest rates.
Futures pointed to opening losses of 0.2% for the S&P 500
and 0.1% for the Dow Jones Industrial Average.
In Europe, the Stoxx Europe 600 was down 0.2% in midday trade,
with the U.K's FTSE 100 up 0.3% and Germany's DAX up 0.1%.
That followed a broadly positive session in Asia where Hong
Kong's Hang Seng and Korea's Kospi both gained 0.2%, Japan's Nikkei
edged up 0.1% and China's Shanghai Stock Exchange dropped 0.5%.
The minutes from the Fed's April 30-May 1 meeting should give
additional color on how its members assessed an unexpected downtick
in inflation during the first quarter and could provide hints on
future policy.
Recent low inflation has raised expectations that the Fed might
cut rates this year, but CMC markets chief market analyst Michael
Hewson said this is unlikely, given solid wage growth and low
unemployment.
U.S. indexes closed higher Tuesday, lifted by technology stocks
after the White House granted temporary exemptions to an export
blacklist against Huawei Technologies Co. But investors in Chinese
technology companies still face the fallout from the recent
resurgence in trade tensions.
Shares in video-surveillance company Hangzhou Hikvision Digital
Technology fell 5.5% Wednesday on reports that it could be the
latest company to be included on the blacklist.
Elsewhere, a U.S. federal judge ruled that chip maker Qualcomm
illegally suppressed competition for cellphone chips, in a decision
that could shake up the broader smartphone industry. Qualcomm
shares were down 12% in premarket trade.
Meanwhile, the British pound dropped after data showed U.K. core
inflation accelerated to a 2.1% annual rate in April, moving ahead
of the Bank of England's 2% target and putting pressure on the
central bank to nudge up interest rates.
Analysts at ING said the bank is likely to keep rates on hold
for now, as the overall economic picture still looks fairly benign
and the continuing uncertainty over Brexit will restrict growth in
the near term. Still, they didn't rule out the possibility of some
tightening in November in the unlikely event that a Brexit deal
goes through.
Early optimism at U.K. Prime Minister Theresa May's latest push
to gain parliamentary support for her Brexit deal evaporated as it
became apparent that she still faces an uphill battle passing the
bill.
Joshua Mahony, senior market analyst at IG, said Mrs. May's
latest plan is likely to prove as abortive as her last three
attempts, as it alienates lawmakers who had previously supported
her. Another failure to break the Brexit deadlock raises the
prospect of a vote of no confidence, and heightens chances of the
U.K. leaving the European Union without a deal, he said.
The British pound rallied immediately after her comments but
quickly returned to lower levels. Before her address, the currency
had hit a four-month low against the dollar.
U.K. banking and insurance stocks were dragged down by the
downbeat Brexit news, with Barclays PLC 1.9% lower and Lloyds
Banking Group PLC down 1.4%.
London-listed retailer Marks & Spencer Group was the biggest
loser on the FTSE 100, falling 5% after posting a sharp drop in
annual pretax profit and launching a heavily discounted rights
issue to finance its joint venture with Ocado Group. It was the
latest disappointment from the retail sector, after U.S. retailers
reported slower sales during the most recent quarter as they brace
for higher tariffs on Chinese imports.
Traders have been struggling to gauge the underlying direction
of markets, which have become increasingly volatile as tensions
between the U.S. and China have flared up in recent weeks.
"The longer the paralysis lasts the more extreme the swings are
going to be," Philippe Gijsels, chief strategy officer at BNP
Paribas Fortis, said.
The WSJ Dollar Index, which tracks the dollar against a basket
of 16 currencies, was flat.
The yield on 10-year U.S. Treasurys edged down to 2.420% from
2.428% Tuesday. Yields move inversely to prices. German 10-year
government bonds were in negative territory at -0.073%.
In commodities, global benchmark Brent crude oil was down 0.2%
at $72.01 a barrel.
(END) Dow Jones Newswires
May 22, 2019 08:11 ET (12:11 GMT)
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