Asia markets inch higher ahead of trade talks; Bank of Japan keeps interest rates steady
The Nikkei 225 in Japan rose 0.43% to close at 21,709.31, with shares of index heavyweight Fanuc jumping 3.14%. The Topix index added 0.45% to finish its trading day at 1,575.58.
Over in mainland China, the Shanghai composite added 0.39% to close at 2,952.34, while the Shenzhen component rose 0.48% to finish its trading day at 9,399.10. The Shenzhen composite gained 0.452% to close at 1,582.07.
Hong Kong’s Hang Seng index pared losses from Monday to bounce back in early trade following yesterday’s press conference, when Beijing reiterated their firm support for the city’s embattled leader Carrie Lam amid protests over an extradition bill. It also suggested there will not be a change in its management of Hong Kong in the near future. The index was up 0.24%, as of its final hour of trading.
Chinese tech giant Tencent’s shares rose 0.75%, with the company announcing Monday that it would cooperate with Qualcomm on gaming devices and 5G.
In South Korea, the Kospi rose 0.45% to close at 2,038.68 following a slump on Monday, with shares of index heavyweight Samsung Electronics gaining 0.98%.
Over in Australia, the S&P/ASX 200 gained 0.28% to close at 6,845.10 — eclipsing the previous record set in November 2007.
Overall, the MSCI Asia ex-Japan index added 0.21%.
Meanwhile, U.S.-China trade negotiations are set to happen in Shanghai this week as the two economic powerhouses seek to reach a deal to end a protracted trade dispute.
Asia-Pacific Market Indexes Chart
|NIKKEI||Nikkei 225 Index||NIKKEI||21709.31||92.51||0.43|
|HSI||Hang Seng Index||HSI||28146.50||40.09||0.14|
|ASX 200||S&P/ASX 200||ASX 200||6845.10||19.30||0.28|
|CNBC 100||CNBC 100 ASIA IDX||CNBC 100||8116.95||5.69||0.07|
Central bank watch
The Japanese central bank also said it intends to maintain the “current extremely low levels” of short- and long-term interest rates for an extended period of time, at least through around spring 2020. The Japanese yen last traded at 108.64 against the dollar after seeing an earlier low of 108.94.
Government data released earlier on Tuesday showed Japan’s factory output falling more than expected in June.
“In a world whereby we’re seeing synchronized monetary easing, the BOJ has got to keep up with ... the dovish tones going ahead into the second half of this year,” Francis Tan, investment strategist at UOB Private Bank, told CNBC’s “Street Signs” on Tuesday.
The U.S. Federal Reserve is widely expected to cut its benchmark lending rate for the first time since 2008 by 25 basis points. Its rate decision is set to be announced on Wednesday stateside. The European Central Bank last week also signaled a potential rate cut and more monetary easing ahead.
“I think it’s baked in the cake that the Fed is gonna cut 25 basis points, Steve Goldman, managing director at Kapstream Capital, told CNBC’s “Capital Connection” on Tuesday.
Currencies and oil
The Australian dollar changed hands at $0.6900 following declines from levels above $0.702 seen last week.
Oil prices rose in the afternoon of Asian trading hours, as international benchmark Brent crude futures added 0.69% to $64.15 per barrel and U.S. crude futures gained 0.67% to $57.25 per barrel.
— CNBC’s Thomas Franck contributed to this report.
European stocks close sharply lower on US-China trade uncertainty, weak earnings
European Markets: FTSE, GDAXI, FCHI, IBEX
U.S. and Chinese negotiators are set to resume face-to-face trade talks on Tuesday, though expectations of a significant breakthrough this week remain low.
Hopes of a resolution took a further blow on Tuesday as U.S. President Donald Trump unleashed a series of tweets claiming that China is not buying more U.S. agricultural products as it promised to do, and may be slow-walking the talks as it awaits the outcome of the 2020 presidential election.
On Wall Street, stocks fell after the U.S. leader renewed his attacks on China. The Dow Jones Industrial Average fell by around 20 points while the S&P 500 and Nasdaq indexes were also in negative territory.
Investors are also anticipating an interest rate cut from the Fed this week. The U.S. central bank is widely expected to lower borrowing costs on Wednesday by a quarter point for the first time in over a decade.
Back in Europe, the pound hit a 28-month low on Monday as fears of the U.K. leaving the European Union without a deal escalated. Prime Minister Boris Johnson said the current divorce deal was dead and cautioned that unless the EU agreed to renegotiate, Britain would leave without a deal on October 31. The pound is currently trading around $1.2155.
Earnings in focus
Siemens Gamesa also plunged, down nearly 18%, after slashing its full-year profitability guidance and reporting a third-quarter margin well below its target range.
U.K.-based BP posted second-quarter underlying replacement cost profit, used as a proxy for net profit, of $2.8 billion, beating the $2.5 billion expected by analysts polled by Reuters and sending the energy company’s stock 3% higher.
Bayer confirmed its outlook for 2019 but struck a slightly less optimistic tone. The German pharmaceutical giant reported earnings before tax, depreciation and amortization (EBITDA) before special items advancing by 25% to 2.9 billion euros. The company now faces 18,400 lawsuits in connection with its weed killer Roundup. Bayer stock fell nearly 4%.
Lufthansa posted a drop in second-quarter earnings on rising fuel costs and price wars, with adjusted earnings before interest and tax (EBIT) falling to 754 million euros from 1 billion euros a year earlier. The airline’s share price slipped 6%.
Stocks fall after Trump attack on China dampens hope of a trade deal, Fed meeting looms
The Dow Jones Industrial Average fell 45 points after dropping as much as 151.49 points. The S&P 500 slipped 0.3%. The Nasdaq Composite dropped 0.3%.
Trump said in a series of tweets Tuesday that China is not keeping its promise of buying more U.S. agricultural products. “China is doing very badly,” he wrote. “Worst year in 27 - was supposed to start buying our agricultural product now - no signs that they are doing so. That is the problem with China, they just don’t come through.”
However, China insists it has bought U.S. agricultural products. A U.S. trade delegation flew to China on Monday for negotiations with Chinese officials.
China and the U.S. agreed to restart trade talks late last month after they fell through in May. The two countries have been engaged in a trade war since last year. In that time, they’ve slapped tariffs on billions of dollars worth of each other’s goods.
Kathy Entwistle, senior vice president of wealth management at UBS, said the trade war is weighing down corporate sentiment.
“At the end of the day, the whole tariff conversation hits on a broader picture,” Entwistle said. “If everything is being affected by tariffs and investors are looking at how that’s going to affect a company’s bottom line, then businesses are going to be more conservative” in their outlook.
Roberto Schmidt | AFP | Getty Images
“Considering the strength of the U.S. economy and the Federal Reserve set to lower interest rates, we are witnessing a rotation from the defensive sectors of the market to the aggressive cyclical areas that are more closely tied to a growing economy and would benefit from economic stimulus,” Bruce Bittles, chief investment strategist at Baird, said in a note. “We recommend staying with the strongest areas of the market which include technology, consumer discretionary, financials and industrials.”
The Fed is set to deliver its decision Wednesday at 2 p.m. ET. Fed Chairman Jerome Powell is also scheduled to hold a news conference at 2:30 p.m. ET.
Investors will also look for clues from Powell about potential rate cuts later this year. Currently, traders are pricing in at least two rate cuts of 25 basis points before the end of the year, according to the CME Group’s FedWatch tool.
“Chairman Powell is in a truly terrible situation,” said JJ Kinahan, chief market strategist at TD Ameritrade. “I don’t think there’s anything he can say to truly please people.”
Kinahan said the market does not know if the Powell is on board to ease further after Wednesday. “His path has been more of ‘let’s wait, see what happens and go from there.’ But what the market is saying is ‘you’re going to do it.’”
Meanwhile, earnings season continued as Merck, Procter & Gamble and GrubHub released their quarterly results.
Merck posted earnings and revenue that exceeded analyst expectations, sending the stock up 0.9%. The company said sales of its cancer-treating drug Keytruda surged 58% in the previous quarter.
Procter & Gamble climbed more than 3% and hit an all-time high on the back of fiscal fourth-quarter results that beat analyst expectations. GrubHub, however, fell more than 10% after posting a disappointing profit.
More than 52% of S&P 500 companies have reported quarterly results thus far. FactSet data shows 75% of those companies have posted a better-than-forecast profit.
Tech giant Apple is scheduled to release its results Tuesday after the bell.