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China Cuts Tariffs, Risk Assets Move Higher, Coronavirus Risk Remains

Thomas Hughes

The U.S. Futures Are Up In Early Trading

The U.S. futures are up in early trading following news China is cutting tariffs. China’s Ministry of Finance announced overnight that it would cut tariffs on $75 billion worth of U.S. goods by 50%. The cut will take effect next week and are intended to advance the healthy and stable development of trade. The Dow Jones Industrial Average, NASDAQ Composite, and S&P 500 are all up about 0.40% in the premarket session.

Meanwhile, traders are still eyeing developments related to the coronavirus outbreak. The death toll has risen near 600 with more than 28,000 cases. Companies like Tesla and Disney are shuttering operations and warning of a significant impact on first-quarter earnings. The risk for traders now is in the economic impact of the virus since it appears containment is working. The question that needs to be answered is how long China’s economy will be shut down and if the virus will reappear once China goes back to work.

In stock news, shares of Tyson and Kellog are both down hard in early trading after reporting weaker than expected results. Kellogs leads with a loss of -6.0% after offering weak guidance, Tyson is down about half that on poor results. In other news, Bristol Meyers is up 3.0% after it beat top and bottom-line estimates. On the economic front, jobless claims fell more than expected and are hovering just above the long-term low. Fourth-quartervproductivity and labor costs rose less than expected at 1.6% apiece.

European Markets Are Up At Midday

The European indices are broadly higher at midday following the positive trade development. The reduction of tariffs on U.S. goods will help free up trade on a global basis as the supply chain becomes unburdened. Europe’s benefit will come in the form of increased trade with China, its largest trading partner, when (if) China’s economy reaccelerates. The DAX and CAC are both up about 0.65% while the FTSE is up about half that.

In other news, the meeting of OPEC+ has been extended for another day. The meeting is expected to end with a production cut intended to support oil prices. WTI and Brent are both hovering near long-term lows waiting for the decision. In stock news, shares of banks are in the lead following earnings from Soc Gen. The lender missed estimates but announced a new buyback plan that sent its shares up 1.2%. Deutsche Bank is leading the group with a gain of 9% after Capital Group revealed a 3% stake.

Asian Markets End Higher In Thursday Trading

Asian markets are broadly higher on Thursday following the trade tariff news. Mainland Chinese stocks surged the most with the Shenzen component of the Shanghai Composite advancing nearly 3.0%. The Shanghai Composite is up 1.72%. The Japanese Nikkie, Hang Seng and Kospi advanced 2.38% to 2.88% while the ASX gained a more tepid 1.0%. Trading in Australia was hurt by weaker than expected December retail sales figures.


This article was originally posted on FX Empire