- U.S. and European stocks lower as earnings roll in. (9:57am ET) The S&P 500 is off 0.3% in early trading as investors continue to process a wave of earnings reports, including those from Walt Disney and biotech giant Gilead. Major indexes were little changed yesterday, though the Nasdaq closed at a new record high, and the Dow hit a new intraday high. The S&P closed flat, with gains in consumer staples (+0.8%) being offset by losses in the energy sector (-1.4%) as crude oil prices fell 1.6%; the commodity is continuing its move lower this morning, now at $51.85/barrel. Overnight in Asia, stocks closed mostly positive, led by Hong Kong’s Hang Seng (+0.7%) and Japan’s Nikkei (+0.5%). Many European exchanges are modestly lower in the afternoon session; although the STOXX Europe 600 is flat, there is relative weakness from the financials sector. Elsewhere, COMEX gold ($1245/oz.) is moving upward, and the yield on the 10-year Treasury is down another 4 basis points (0.04%) to 2.34%.
- Chinese reserves drop. As expected, Chinese foreign currency reserves fell last month to just under $3 trillion. While this is still a huge stockpile, China’s reserves were roughly $4 trillion at their peak. The government has said it would be comfortable with reserves as low as $2 trillion, which would still make it the largest globally (Japan is second at $1.3 trillion). Nevertheless, the Chinese have been spending at a rapid rate to support both their economy and the yuan. Declining reserves call into question the government’s ability to continue to support the yuan.
- Europe earnings rebound. European earnings growth for the fourth quarter is tracking in the mid-teens, ahead of the U.S. on rebounding energy sector profits and resilient economic growth in the face of political uncertainty. The macroeconomic outlook is still very much uncertain with elections coming up, particularly in France, and Greece back in the news. However, resumption of earnings growth is an encouraging step which, along with attractive valuations relative to the U.S. and the recent pullback in the U.S. dollar, suggests paying a bit more attention to opportunities in these markets in the coming months.
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- UK: House of Commons to Vote on Article 50
- India: Reserve Bank of India Meeting (Rate Cut Expected)
- Mexico: Central Bank Meeting (Rate Hike Expected)
- China: Money Supply and New Loan Growth (Jan)
- China: Imports and Exports (Jan)
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The economic forecasts set forth in the presentation may not develop as predicted.
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