Global Rally Fizzles After Horrible German Data; Aussie Dollar Plunges, Iron Ore Surges

Wednesday, February 6, 2019
By Paul Martin

by Tyler Durden
Wed, 02/06/2019

Repeating a pattern that has become a distinct feature to the start of 2019, global markets and US equity futures have been lower ahead of the US cash session (at which point they levitate sharply in the last 2 hours of trading), and today is no exception with the rally that brought global stocks to a 2 month high reversing overnight with China still on Lunar New Year holiday, and the MSCI world equity index last down 0.07% on Wednesday morning.

In the key event overnight, President Trump delivered the State of the Union Address in which he said the state of the union is strong and unemployment has reached its lowest level in half a century. President Trump also noted that he sent a proposal to Congress that includes plans for a physical barrier or wall on the southern border and said that he will get the border wall built, while he also commented that a new trade agreement with China must include end to unfair trade practices, reduce chronic trade deficit and protect American jobs.

Futures on the S&P 500, Dow Jones and Nasdaq all drifted lower. European stocks markets opened slightly in negative territory and then traded mixed as a fresh new batch of earnings failed to lift spirits after Trump’s address touched on trade and budget issues but provided investors with few insights. Banks were the biggest drag on the STOXX 600, with shares BNP Paribas down 1.6 percent after France’s largest-listed lender lowered its profit and revenue growth targets for 2020 after a tough fourth quarter.

Germany’s DAX dropped 0.5% with Daimler weighing after their earnings report, the German carmaker’s cautious tone reigniting concern about global trade. Tech sector is the best performing, banks also trade well. BNP Paribas bucks the trend but trades off worst levels as France’s CAC 40 traded 0.4% lower and Spain’s IBEX fell 0.1%. The eurozone Stoxx 600 blue chip index fell 0.3%.

Further weak data from Europe prompted demand for core euro zone bond yields as investors pushed back expectations that the ECB will hike rate any time soon. Of note, German industrial orders fell unexpectedly on weak foreign demand in December, tumbling 7% in December, the biggest drop since 2012, and a further sign that companies in Europe’s largest economy are struggling with a slowing world economy and trade disputes.

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