By Lorcan Roche Kelly
If yesterday was dominated by hopes of an imminent agreement over the U.K.’s exit from the European Union, today is — so far — dominated by fears that a deal may not be possible. One of the main stumbling blocks continues to be whether Northern Ireland’s Democratic Unionist Party, on whom Prime Minister Boris Johnson relies for his parliamentary majority, will support the deal. With one British official saying the prospects for a breakthrough are now low, pound volatility has jumped as the currency retreats from yesterday’s high.
China threatened unspecified “strong countermeasures” if the U.S. Congress enacts legislation supporting Hong Kong protesters after the House passed a package of measures backing a pro-democracy movement in the former British colony. For investors, worries are increasing that this may make negotiations over a trade deal between the U.S. and China more difficult. Elsewhere, Turkey has banned short-selling of the country’s banks after an indictment was filed Tuesday in Manhattan against Turkiye Halk Bankasi AS accusing the state run-lender of a plot to help Iran avoid U.S. sanctions.
Yesterday’s bumper day for bank earnings produced results which generally beat market expectations, helping push JPMorgan Chase & Co. shares to an all-time high. Today it’s the turn of Bank of America Corp. before the open. Costs and the interest rate outlook will be key for the lender, according to Bloomberg Intelligence. Away from banks, there will also be interest in Netflix Inc.’s performance amid increased competition from Walt Disney Co., Comcast Corp., Apple Inc. and AT&T Inc.
Overnight the MSCI Asia Pacific Index climbed 0.7% while Japan’s Topix index closed 0.7% higher, paring earlier gains of as much as 1.6% after China’s warning to the U.S. In Europe, the Stoxx 600 Index was 0.3% lower at 5:50 a.m. Eastern Time with Brexit headlines dominating market sentiment. S&P 500 futures were pointing to a drop at the open, the 10-year Treasury yield was at 1.724% and gold was slightly higher.
The U.S. retail sales report for September is forecast to show a small slowdown in growth to 0.3% for the headline number when the data is released at 8:30 a.m. In Federal Reserve events, Chicago Fed President Charles Evans, Dallas Fed President Robert Kaplan and Fed Governor Lael Brainard all speak later, and the Beige Book is published at 2:00 p.m. TIC flows data for August is released at 4:00 p.m