In a marked contrast to recent action, markets largely held steady overnight. The US dollar edged higher, gold fell slightly and bond yields rose. Shares were mixed to flat, with gains for blue-chips but pressure on IT, healthcare and consumer stocks offsetting the gains.
Data supported the market action. Activity indicators showed expansion in the US and China, but contraction in Japan and Europe.
Energy markets defied the overall mood with 2% gains for most crude oil contracts after the US Department of Energy registered a surprise 1 million barrel drawdown on stockpiles over the week. The moves suggest upside risk, as the rise occurred against a backdrop of a stronger US dollar and a build in gasoline inventories.
Company reporting and guidance remains a key driver of share market performance. Almost half of the S&P 500 company reports are in. Sales are up 1.75%, but earnings are around 5% higher than the previous quarter. These are modest increases, given the damage done to both metrics by virus containment measures. It’s clear investors continue to focus on a projected bounce in activity in the coming quarters.
The Bank of England delivers an interest rate decision tonight. Analysts believe both interest rates and the Bank’s asset purchase programs will remain unchanged, and the pound is trading steadily this morning. Australian trade data is forecast to show a 6% increase in exports in December, largely driven by increasing iron ore prices. The trade surplus is predicted to grow to $8.75 billion
Asia Pacific futures markets point to a negative start to trading across the region. Weakening lower currencies may weigh on sentiment. Another strong night for cryptocurrencies, illustrated by a 5% gains in CMC’s All Crypto index, could draw trader attention.