US Stocks Rebound as Earnings Drive Sentiment Amid Renewed Trade War Concerns

October 30, 2018

New York (Oct 30)  Global stocks attempted yet another rebound Tuesday, with reports of direct market intervention in China supporting prices in Asia and stronger-than-expected blue chip earnings putting European bourses on solid footing following a volatile session on Wall Street that saw a 900-point swing for the Dow Jones Industrial Average and a further worrying plunge in big-name tech companies.

U.S. markets were rattled in late Monday trading by a report from Bloomberg that suggest President Donald Trump was prepared to slap tariffs on a further $257 billion worth of China-made goods if his meeting next month with President Xi Jinping at the G-20 Summit in Argentina did not result in a significant breakthrough in their ongoing trade war. The report helped pull U.S. stocks sharply lower in late trading and hindered gains in Asia in the opening hours, although markets rebounded after China's securities regulator pledged to support market conditions, and encourage buybacks and mergers, in order to stabilize the nation's beaten-down equities.

China's Shanghai Composite ended just over 1% to the upside at 2,568.05 points while the broader MSCI Asia ex-Japan index, which has fallen 12% so far this month as part of its worst 30-day period since the financial crisis, gained 0.21% heading into the final hours of trading. Japan's Nikkei 225 jumped more than 1.45% by the close of trading in Tokyo to end the session at 21,457.29 points. Early indications from U.S. equity futures suggest benchmarks will attempt to claw back some of yesterday's steep losses at the opening bell, with contracts tied to the Dow Jones Industrial Average  indicating a 122 point gain while those linked to the broader S&P 500  , which closed yesterday withing a whisker of "correcting" 10% from its September 20 peak, suggested a 15 point gain for the broader benchmark.

The corporate earnings calendar will be back in focus again today, as we approach the half-way point of the third quarter reporting season, with updates from Dow components Coca-Cola (KO) and Pfizer (PFE) alongside Mastercard (MA) , Aetna (AET) , Allergan (AGN) , Baker Hughes (BHGE) , General Electric (GE) , T-Mobile US (TMUS) , eBay (EBAY) Under Armour (UAA)  and Facebook (FB)  after the close of trading later today.

Coca-Cola posted stronger-than-expected third quarter earnings Tuesday and said solid demand for its Coke Zero brand supported North American revenues as a stronger U.S. dollar trimmed international sales growth.

Coca-Cola shares were marked 0.95% higher in pre-market trading following the results, indicating an opening bell price of $46.90 each, a move that would extend the stock's year-to-date advance to around 2.7% and value the Atlanta, Ga.-based icon at just over $200 billion.

Pfizer posted stronger-than-expected third quarter earnings Tuesday, the last under the leadership of outgoing CEO Ian Read, but narrowed its guidance range for full year sales, sending shares lower in pre-market trading.

Dow component Pfizer shares were marked 2.82% lower in pre-market trading following the results, indicating an opening bell price of $42.01, a move that would still leave the stock with a year-to-date gain of around 16% and value the New York, NY-based group at just over $250 billion.

General Electric slashed its annual dividend to a single penny Tuesday, after it posted weaker-than-expected third quarter earnings and booked a $22 billion goodwill impairment charge as it attempts to turn its complicated business around under new CEO Larry Culp.

GE posted a loss of $2.63 per share for the three months ending in September, well shy of the 20 cent profit expected by analysts, and said it would cut its dividend from 12 cents a share to 1 cent starting in 2019. Group revenues were pegged at $29.57 billion, GE said, just shy of the Street forecast of $29.92 billion.

However, moves to split its power unit into two businesses helped the stock rise more than 2% in pre-market trading to $11.39 each.

European stocks edged higher at the start of trading Tuesday, again driven by solid earnings from big-ticket stocks such as Volkswagen AG (VLKAY) and BP Plc (BP) , and bolstered by weakening currencies in both the U.K. and Europe as the dollar index tested 10-week highs in overnight trading. However, the gains were quickly reversed as U.S. equity futures reacted to after-hours trading of the CBOE's Volatility Index VIX, which gained 1.4% to 24.620 points.

The region-wide Stoxx 600 slipped 0.05% in the opening hour of trading while Germany's DAX performance index fell 0.65% despite a 4% jump for Volkswagen after the world's second-largest automaker posted a steep drop in third quarter profits but held to its full-year earnings guidance.

Britain's FTSE 100 was modestly stronger by mid-day in London trading, rising 0.18% as weaker pound, which traded at 1.2765 against the dollar, and a 3.7% gain for BP plc after the U.K.-based oil major posted its best quarterly profit in five years, supported stocks.

Global oil prices, however, which supported BP's September quarter profit surge, have turned significantly since, falling more than 10% over the month of October and extending gains again today amid bets that demand will wane into 2019 as the economy slows and prices will fall as production rates in the U.S. and Saudi Arabia continue to surge in an attempt to offset next week's sanctions on the sale of Iranian crude.

Brent crude contracts for December delivery, the global benchmark, were seen 55 cents lower from their Monday close in New York and changing hands at $76.79 per barrel while WTI contracts for the same month, which are more tightly liked to U.S gas prices were marked 40 cents higher at $66.64 per barrel.


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