Cautious Markets Creep Higher, Banks Lead In EU, Tech Leads In The US

Asia Cautious In Wake Of US Decline

Asian markets were cautious in the wake of Tuesday’s US sell-off. The US broad market index fell -1.82% on worries in tech and traders remain wary. The Hong Kong Heng Seng led gains in the region with an advance of 0.50%, the Shang Hai was not far behind with a gain near 0.20%. Others in the region posted losses but the declines were small. The Australian ASX weighed down by commodity outlook, led decliners with a loss of 0.51% followed by the Nikkei’s -0.35% and the Korean Kospi’s -0.29%.

Word in trade gives traders another reason for caution. An update to the US trade representatives investigation into Chinese trade practices says China has made no change to its core trade practices. The report went on to provide support for President Donald Trump’s program of tariff’s and casts a shadow of doubt on the upcoming meeting between Trump and Xi. This market watcher does not expect to see much in the way of change after the meeting but I do expect a positive outcome regarding rhetoric and outlook.

European Market Up On Banks

The European markets were broadly higher in light trade at midday. The major indices were supported by the financial sector, led by Italian banks, as oversold markets find buyers. The financials were up about 1.0% in early Wednesday trading leading the major indices to move higher as well. The UK FTSE led the charge with an advance near 0.85% while the DAX and CAC were trading higher by 0.75% and 0.35%.

In financial news, the EU Commission is set to issue a reprimand to Italy’s rebellious government. Italy has refused to alter its plans for spending and now the EU is going to sanction the nation with a fine.  The dispute comes amid growing concern Brexit negotiations are going to fail, an event that will have a far-reaching effect on global economics. Theresa May is expected to appear in Brussels and may provide new information later in the day.

US Market Led By Tech, Oil

US markets were up in early Wednesday futures trading as tech and oil prices rebound. The FANNG names, all down more than 20% as of yesterday’s close, rose between 1-2% and may move higher in the near-term. The tech sector has seen a major sell-off driven by slowing-growth fears that have set the sector up for rebound over the next few months. The market is looking forward to a robust holiday shopping season (up >5% annually) and that will drive outlook, results and share prices higher.

Energy provided another support for the US market in early Wednesday trading. WTI rebound nearly 3.0% from Tuesday’s fresh one-year low. The energy market is selling off on fear of global supply glut but overextended and ripe for reversal. Traders should expect today’s action to be light and on low volume. Tomorrow is the Thanksgiving Holiday and the market is closed. Friday action is likely to be light as well.