European Stocks Drop at Open; U.S. Banks Earnings Eyed

January 14
15:04 2020

By Peter Nurse – European stock markets pushed lower Tuesday, as investors took a cautious view ahead of the start of the earnings season.

At 03:35 ET (08:35 GMT), the U.K.’s FTSE index was trading 21 points, or 0.3%, lower, France’s CAC 40 was 49 points, or 0.8%, lower, while the DAX dropped 62 points, or 0.5%. The pan-Europe Euro Stoxx 50 index fell 30 points, 0.8%.

European earnings results will begin in earnest next week, but there are a number of U.S. reports due this week, starting today with banking giants JPMorgan Chase (NYSE:JPM) (NYSE:JPM), Citigroup (NYSE:C) (NYSE:C) and Wells Fargo (NYSE:WFC) (NYSE:WFC). The banks are often taken as a rough proxy for the health of the broader economy, and are thus likely to set the tone of the overall earnings season.

There was limited impact from news that China’s dollar-denominated exports and imports were both sharply higher than expected in December. Exports rose 7.6% on-year, against a 1.3% drop in November, while imports were 16.3% higher than a year ago, Reuters reported, citing data from the Chinese customs authority. Chinese export growth still hit a three-year low last year overall, as trade suffered from the expansion of U.S. import tariffs.

Strong import data from China tend to be positive news for European stock markets as the EU is China’s largest trading partner. Most of this trade is in industrial and manufactured goods.

Additionally, sentiment had received another boost overnight as the U.S. revoked its decision, taken last summer amid tensions between the two economic superpowers, to call China a currency manipulator – just days before the two countries are set to sign phase one of a trade deal.

The news helped raised optimism ahead of the U.S. and China signing the first phase of their trade deal on Wednesday. This phase one deal would prevent any further tit-for-tat tariffs and roll back some existing U.S. tariffs in Chinese goods.

Elsewhere, crude oil edged lower as investors kept a wary eye on tensions in the Middle East. However, gold futures lost ground as investors left the safe haven amid positive signs on the trade deal.

U.S. Crude Oil WTI Futures traded down 0.4% at $ 57.87 by 3:35 AM ET (08:35 GMT). International Brent Oil Futures also fell 0.3% to $ 64.03. Gold futures for February delivery on New York’s COMEX fell 0.3% to $ 1,545.75.

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