US stocks continue rising in anticipation of trade negotiations with China

February 12, 2019

By IFCMarkets

The US currency continued strengthening

On Monday, there was no single trend in the US stock market. Indices S&P 500 and Nasdaq 100 slightly increased, whereas Dow Jones Industrial Average lost 0.2 %. Investors’ attention is still focused on the upcoming US-China trade negotiations, that will be held February 13-14. Earlier, US President Donald Trump announced that if negotiations end up with failure, from March 1, 2019 import duties of 10% to 25% on the import of Chinese goods worth $ 200 billion a year will be increased. Surely this will cause reciprocal measures by the Chinese authorities and will intensify of global trade wars. The stock market is supported by good corporate data. Currently two thirds of S&P 500 companies have already reported for the 4th quarter of 2018, of which more than 230 companies have exceeded profit forecasts. Now investors expect that quarterly profit growth will be an impressive 16.5%. At the same time in the 1st quarter of 2019, the total profit may be reduced by 1%. Against the backdrop of increasing global risks, the ICE US Dollar Index continued to increase for the 6th consecutive day and updated the maximum in 2019. Today it is not expected to publish significant macroeconomic indicators in the United States. Futures on US stock index indicate a higher opening.

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The EUR/USD exchange rate to the fell below 1.13 level

Previously the weakening of EURUSD contributed to the lower forecast of growth of the Eurozone economy from the European Commission. Now an additional negative for the single currency has become investors’ concerns that the ECB will launch a new round of monetary emission known as Long Term Refinancing Operations (LTRO). The last time such program was carried out, starting in 2016. The total amount of emission was 2.6 trillion euros. Investors do not rule out that the ECB may announce a new LTRO program during its meeting session in March or in June of this year. It may also be called targeted LTRO or TLTRO. Amid the weakening of the euro, European stock indexes rose on Monday and continue to rise today. Low exchange rate can stimulate the activities of companies – exporters. In addition, there was a significant increase on the shares of the Italian banks Banco BPM, UBI Banca and UniCredit due to the fact that they successfully reported to the ECB. Deutsche Post’s quotes increased by 2.5% due to good reporting. Today, particularly important macroeconomic data in the EU is not expected.

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Japanese stock index Nikkei showed a strong rebound from a monthly minimum

The computer disks and electronics manufacturerTaiyo Yuden reported an increase in net profit in April-December by 58% and the repurchase of its own shares. Due to this, they have risen in price by 20%. Isuzu Motors (+ 7.8%) also posted good reports. The weakening of the yen against the US dollar contributed to the growth of quotations of Japanese exporting companies: Advantest (+ 5%), Mazda Motor (+ 2.7%), Panasonic (+ 3.2%) and Hitachi (+ 1.8%) . The Australian dollar has slightly strengthened due to the positive indicators publication of NAB business activity.

Brent loses

Quotations coffee dropped on monday 3rd day in a row. The Brazilian Exporters Association Cecafé reported an increase in exports of green coffee from Brazil in January 2019 to 3.05 million bags of 60 kg. This is 20.3% more than in January 2018 and is a new monthly record. Export growth was driven by improved weather conditions in South America.

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