Global Markets Rise Ahead Of Fed And Trade Talks As Gold Hits 8 Month High

January 30, 2019

London (Jan 30)  World stocks inched up and the dollar steadied on Wednesday after Apple failed to disappoint investors and reported earnings, meeting Wall Street's lowered expectations, and sending its stock higher in a muted session as investors braced for a barrage of catalysts, from US-China trade talks and the Fed meeting to an avalanche of corporate earnings. The pound halted a two-day decline and U.K. shares rallied after lawmakers voted to renegotiate Brexit.

The MSCI world equity index was fractionally in the green following gains in Asia overnight and a muted start to trading in Europe. The pan-European STOXX 600 benchmark index was flat.

US equity futures all rose, supported by with Apple shares which extending gains in pre-market trading after first-quarter earnings reassured investors that the worst may be past, although it remains very much unclear if Apple can pivot from a cell phone to a "services" company, especially with services revenue growth slowing sharply. In any case, investors were relieved that there was no more bad news after the company shocked financial markets at the start of this month with a revenue warning that sparked fears that U.S.-China trade tensions were taking a toll on the tech sector.

“Apple earnings delivered enough for investors to come back on board,” said analyst Neil Wilson. “Although Apple still faces big questions like pricing structure, upgrade cycles, FX headwinds and weaker Chinese demand, we did get a positive answer to the key question on whether services margins can help rerate the stock higher.”

The Stoxx Europe 600 Index was mixed after data showing euro-area economic confidence extended its worst losing streak in a decade, ahead of Sino-U.S. trade talks and a closely watched Fed announcement in which Chair Powell is likely to disappoint markets. The UK's FTSE 100 traded higher by 0.9%, climbing for a second day and outperforming continental bourses, with CAC also rising 0.5%; DAX trades lower by 0.4%. Investors fretted about the possibility of a “no-deal” British departure from the European Union after UK lawmakers instructed Prime Minister Theresa May on Tuesday to reopen the treaty she had negotiated with Brussels to replace a controversial Irish border arrangement.

Goldman Sachs upped its “no-deal” Brexit probability to 15 percent from 10 percent, and cut the chance of Brexit not happening at all to 35 percent from 40 percent according to Reuters. “Tuesday’s Brexit amendments offered little additional clarity to anyone,” Goldman Sachs analysts wrote.

Earlier in the session, Stocks in Japan and China slid, while they increased in South Korea, Australia and Hong Kong. The yuan advanced to the highest since July on hopes for the U.S.-China trade talks getting underway in Washington. Growing fears that central banks are preparing to reflate "whatever it takes", helped send gold to an eight-month high, underscoring lingering investor caution.


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