Global Stocks Pause Ahead Of GDP Report; Nasdaq Hits Fresh Record High

Despite yesterday’s whopping beats by Amazon and Google which sent the Nasdaq to new record highs after hours, this morning futures S&P futures are little changed ahead of the closely watched Q1 GDP report, European stocks and Asian equities are slightly lower, oil is higher after Russia’s energy minister Novak said Russia had reached the 300kbpd oil cut per the OPEC pact, and the dollar was modestly in the red.

Concern about global trade and Trump’s “America First” policies kept appetite for risk at bay on Friday, setting world stocks on the path to a sluggish end to what will still be their fifth straight month of gains, per Reuters. Key overnight data included a disappointing GDP print out of the UK, where Q1 growth came in at 2.1%, below the 2.2% expected, which however failed to dent the ongoing short squeeze in sterling, as well as the hot Eurozone CPI print, with headline inflation rising more than expected at 1.9%, while core CPI printed at a 4 year high of 1.2%.

Economic data and earnings took a back seat, and global equities retreated, trimming a sixth straight monthly advance, as geopolitical concerns lingered following the main overnight news which was a soundbite from a Trump interview with Reuters in which he warned that a “major, major” conflict with North Korea is possible. 

In an interview with Reuters, Trump called the five-year-old trade pact with South Korea “unacceptable” and said it would be targeted for renegotiation after his administration completes a revamp of the North American Free Trade Agreement (NAFTA) with Canada and Mexico. Trump’s comments stunned South Korean financial markets, sending Seoul stocks and the won into reverse.

Saturday marks Trump’s 100th day in office and his attacks on free trade and scepticism about his administration’s ability to see through tax and spending campaign promises has dented some of the enthusiasm in markets that followed his election win. “Trump is reaching the 100 day mark with nothing to show for it and these recent comments just coincide with that. They (the U.S. administration) are finding it hard to push through fiscal plans and all this rhetoric is probably related,” Kiran Kowshik, strategist at Unicredit.

In Europe, equities pared a third monthly gain as Barclays dropped the most since November, becoming the latest bank in the region with trading results to lag American peers. Banking results dominated early trading with Barclays shares sliding 5 percent after weak investment banking results at the UK bank while UBS jumped 2.6 percent after it handily beat analyst expectations.

Ironically, outside of banking, European corporate profits are ahead of the U.S. The euro was poised for its biggest weekly gain since July, lifted by higher-than-expected eurozone inflation. European government bonds fell. West Texas intermediate crude rebounded after a sharp fall on Thursday.

Bank of America Merrill Lynch noted that the $21 billion of inflows into European equity funds over the past week were the highest since December 2015. “The hard data for equities is earnings — and they are powering ahead. Q1 earnings season is very strong and revisions trends are positive and broad based,” said analysts at the U.S. broker

On the US domestic front, confusion also reigns with the government facing possible shutdown, even as Trump’s second attempt to pass Obamacare has been indefinitely postponed. The U.S. GDP data will be assessed to see whether the Federal Reserve’s resolve to raise interest rates two more times this year will materialize even as the prospect of a limited government shutdown looms.

“It’s a busy end to the week with a lot of data out of both Europe and the U.S.,” Jim Reid, a strategist at Deutsche Bank AG in London, wrote in a note. “Ahead of tomorrow’s first 100 days of Trump today we’ll see if a shutdown can be avoided.”

In summary, the Stoxx Europe 600 Index slipped 0.1 percent as of 6:27 a.m. in New York, dropping for a second day after reaching the highest level since August 2015. Japan’s Topix fell 0.3 percent. The gauge gained 2.9 percent for the week, the best performance this year. Futures contracts on the S&P 500 were unchanged. The underlying gauge rose 0.1 percent on Thursday and the Nasdaq 100 Index jumped 0.5 percent to a record.

In commodities, oil prices rose but were still on track for a second straight weekly loss on concerns that an OPEC-led production cut has failed to significantly tighten an oversupplied market.WTI was at $49.43 per barrel at 0649 GMT, up 46 cents, or 0.94 percent, from their last close. However, WTI is still set for a small weekly loss and is around 8 percent below its April peak. Brent crude was at $51.91 per barrel, up 47 cents, or 0.91 percent. Brent is almost around 8.5 percent down from its April peak and is also on track for a second, albeit small, week of declines.

Key economic data include 1Q GDP, U. of Michigan consumer sentiment index. Scheduled earnings include Exxon, Chevron, Colgate.

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