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May 3, 2018

Asia, Europe and U.S. Stock Markets Reoport - May 3, 2018.


Stocks, dollar, Fed and US-China trade talks in focus

Cheang Ming

Asian shares closed mixed on Thursday as U.S.-China trade talks kicked off and investors digested an acknowledgment by the Federal Reserve that inflation had moved nearer its target.
South Korea's Kospi index came under pressure, with the benchmark declining 0.73 percent to close at 2,487.25. Banks and manufacturing names were mostly lower, while technology stocks eked out some gains.
Down Under, the S&P/ASX 200 climbed 0.8 percent to 6,098.30 amid broad-based gains, with gold producers and the materials sector among the best performers.

-35.25 -0.16%
HSI HSI 30313.37
-410.51 -1.34%
ASX 200 S&P/ASX 200 6098.30 --- UNCH 0%
SHANGHAI Shanghai 3101.13
19.96 0.65%
KOSPI KOSPI Index 2487.25 --- UNCH 0%
CNBC 100 CNBC 100 ASIA IDX 8587.31
-22.20 -0.26%
Greater China markets turned in a mixed performance, with Hong Kong's Hang Seng Index falling 1.44 percent by 3:07 p.m. HK/SIN and leading losses in the region. The financials and technology sectors were down 1.29 percent and 1.59 percent, respectively, amid broad-based negativity before the market close.
The decline was likely due to concerns over a trade war, said Kenny Wen, a strategist at Everbright Sun Hung Kai, citing a Reuters report in which a Chinese government official said China had a "much greater ability to endure" the effects of a trade war than the U.S.
Despite worries over trade issues, mainland markets finished the day with gains. The Shanghai composite reversed early losses to close higher by 0.65 percent at 3,101.13 and the Shenzhen composite advanced 1.01 percent to 1,792.89.
MSCI's broad index of shares in Asia Pacific excluding Japan traded lower by 0.6 percent in afternoon trade.
Markets in Japan were closed on Thursday.

The Fed, trade and Xiaomi

Trade was in focus as a U.S. delegation begins negotiations with their Chinese counterparts on Thursday and Friday in Beijing. Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross and Trade Representative Robert Lighthizer are among the U.S. officials participating in the meeting.
"[T]he mood music coming out isn't great ... as they continue to stress that they will return early if they do not think there is much promise of progress," Robert Carnell, Asia Pacific head of research at ING, said in a note.
"This could be a market mover in either direction. But more likely down," he added.
Investors also digested the Fed's decision to keepinterest rates unchanged, a move that was widely expected. The central bank noted that inflation was starting to inch higher.
In its post-meeting statement, the central bank's Federal Open Market Committee said "overall inflation and inflation for items other than food and energy have moved close to 2 percent." That was an upgrade from its March meeting, when the committee noted that the indicators had "continued to run below 2 percent."
Investors had been awaiting the Fed's statement for clues on its outlook on inflation and the economy.
"The FOMC statement reinforced market expectation for another 25 basis points rate rise in its June meeting," Tai Hui, chief market strategist at J.P. Morgan Asset Management, said in a note.
The mixed performance in Asia came after U.S. stocks finished the day in negative territory despite strong earnings releases stateside.
National Australia Bank announced earlier that its first-half cash profit declined 16 percent. Reuters said the fall came as the bank recorded costs associated with restructuring. Shares closed lower by 0.64 percent.
Of note, Chinese smartphone maker Xiaomi on Thursday filed an initial public offering application in Hong Kong. In the filing, the company reported revenue rose 68 percent to 114.6 billion yuan ($18 billion) in 2017 and a net loss of 43.9 billion yuan ($6.9 billion) for the period.
In currencies, the dollar index, which tracks the U.S. currency against six major peers, traded at 92.478 at 2:56 p.m. HK/SIN, below the 92.8 handle touched on Wednesday and under a four-month high hit in the last session. The dollar index initially dipped in reaction to the Fed's statement in the last session, but later pared some of those losses.
Against the yen, the dollar softened to trade at 109.65.
Oil prices were steady on Thursday following a larger-than-expected increase in U.S. crude inventories: U.S. crude futures were higher by 0.04 percent at $67.96 per barrel and Brent crude futures for July delivery were flat at $73.36.
CNBC's Jeff Cox and Yen Nee Lee contributed to this report. 


European stocks close lower as euro zone inflation slips; US starts trade talks with China

Silvia Amaro, Ryan Browne

European equities closed lower Thursday as investors monitored inflation data, U.S.-China trade talks and new earnings reports.

FTSE FTSE 7502.69
-40.51 -0.54% 746023848
DAX DAX 12690.15
-112.10 -0.88% 101873252
CAC CAC 5501.66
-27.56 -0.50% 81710674
IBEX 35 --- --- --- --- --- ---
The pan-European Stoxx 600 closed provisionally down 0.75 percent with every sector and major bourse trading in negative territory.
Shares of Logitech jumped 6.5 percent, and led the gains across Europe, after announcing that there could be an increase in its gross margin targets. BPost fell 13 percent following an announcement that its full-year results will come at the low end of its guidance.
Adidas dropped 6.8 percent following its first-quarter results. The company reported better-than-expected net profit but its Reebok business saw a disappointing performance. Solvay fell 5.7 percent as its first-quarter core profit came in below expectations. The company's performance was hit by currency fluctuations.

Euro zone inflation disappoints

On the data front, euro zone inflation unexpectedly declined in April, raising questions about the European Central Bank's plan to scale back its stimulus program.
The European Commission said in its spring economic forecast that growth was set to remain strong this year and ease slightly into 2019, and that the economy was more exposed to external risks like volatility in the markets.
The executive arm of the European Union put forward Wednesday a proposal for its next budget (to apply from 2021 to 2027). However, this has been received with some criticism in some capitals, which are not willing to increase their contribution to the EU budget to make up for the U.K.'s exit.

US-China trade talks 

On Wall Street, stocks moved lower as worries grew over whether the U.S. would be able to resolve its trade dispute with China.
Investors are monitoring a meeting between U.S. and Chinese officials on trade Thursday and Friday. Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross and Trade Representative Robert Lighthizer are among the U.S. officials participating in the meeting.
The talks come after President Donald Trump proposed new tariffs on Chinese goods and Beijing responded with a set of duties that could potentially apply to U.S. products too. One of these products was soybeans. Media reports suggest that China has stopped buying soybeans from the U.S. amid the recent trade tensions.

Is the greenback back?

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Not a Scientific Survey. Results may not total 100% due to rounding.
In commodities, oil prices slipped as a climb in U.S. crude inventories and production output outweighed the prospect of new U.S. sanctions on Iran. Brent crude fell 23 cents to $72.13 while West Texas Intermediate (WTI) crude fell 17 cents to $67.76.


Stocks recover most of earlier sell-off

Fred Imbert, Thomas Franck, Sam Meredith

The Dow Jones industrial average erased a nearly 400-point loss Thursday afternoon as tailwinds from strong earnings helped the index snap a four-day losing streak.
The Dow Jones industrial average edged out a 5.17-point gain to finish at 23,930.15 by the closing bell after falling nearly 400 points in morning trading. The S&P 500 closed down 0.23 percent to close at 2,629.73 after dropping as much as 1.6 percent. Both indexes also dipped below their 200-day moving averages, but were back above those levels by the end of the session.
The Nasdaq composite fell 0.18 percent after dropping more than 1 percent, ending the day at 7,088.15. The Nasdaq pared losses later in the day was buoyed by a rebound in Amazon and Apple shares as well as a 0.6 percent gain in software giant Microsoft. Enterprise technology company Cisco added 1.3 percent.
"The market got very cheap and buyers just came in," said Jeremy Klein, chief market strategist at FBN Securities. "I mean you'll still seeing sectors like banks lag ... [but] industrials had a really nice bounce. A stock like Boeing, which has been really dragging lately, found a nice bid this morning."
Boeing — which has struggled for gains since reporting earnings last week — carried the Dow higher, with the aircraft manufacturer rallying 2 percent. Shares of fellow industrial company 3M gained 0.6 percent.
The afternoon rally came after a sharp fall in equities earlier in the session, as a batch of better-than-expected earnings failed to push the major averages higher while trade and geopolitical worries mounted.
Traders work on the floor of the New York Stock Exchange, (NYSE) in New York. Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange, (NYSE) in New York.
Tesla reported better-than-forecast quarterly results Wednesday after the close. However, the stock fell 5.5 percent after CEO Elon Musk dismissed questions from analysts regarding gross margins and Model 3 production.
Meanwhile, Church & Dwight, Blue Apron and Express Scripts also posted results that beat the Street's forecasts.
Treasury Secretary Steven Mnuchin is leading a group of Trump administration officials to meet with Chinese Vice Premier Liu He and discuss trade between the two nations.
Shortly before the talks were set to take place in Beijing, the mood between the world's two largest economies worsened amid reports the U.S. administration is considering taking executive action to restrict some Chinese firms' ability to sell telecoms equipment.
On Wednesday night, President Donald Trump said in a tweet the group of administration officials "is in China trying to negotiate a level playing field on trade! I look forward to being with President Xi in the not too distant future."
"Trump's 'level playing field' implies a harder line and general sentiment around the talks is going to be volatile," said Tom Essaye, founder of The Sevens Report. "Chances of a grand bargain are virtually nil but the market does want a de-escalation of trade tensions."
Meanwhile, Iran Foreign Affairs Minister Mohammad Javad Zarif said the country will not renegotiate the nuclear deal it struck with the U.S. in 2015. Zarif said in a YouTube video: "Iran will not renegotiate what was agreed years ago and has been implemented ... also we will reject any ratification of it."
Gold futures jumped 0.5 percent to settle at $1,312.70 per ounce. The precious metal is often seen as a safe-haven trade.
Wall Street also eyed Washington amid more news regarding Trump's legal troubles. In an interview with Fox News, Rudy Giuliani, one of the lawyers representing the president in the special counsel's probe, said Trump repaid his personal lawyer Michael Cohen for a hush payment to porn star Stormy Daniels.
His statements appear to contradict the version of events told by both Trump and Cohen about the payment.
"We're facing a dual headwind of trade wars and noise" around the Mueller investigation, said Art Hogan, chief market strategist at B. Riley FBR. He noted the market had recently been ignoring news about Trump's legal troubles as corporate earnings results flooded the news cycle.

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