Portfolio

US pre-open: Stocks seen up as another government shutdown is averted

By Michele Maatouk

Date: Tuesday 12 Feb 2019

US pre-open: Stocks seen up as another government shutdown is averted

(Sharecast News) - US stock futures pointed to a positive open on Wall Street on Tuesday as investors welcomed news of a tentative deal to avert another government shutdown.
At 1215 GMT, Dow Jones Industrial Average and S&P 500 futures were up 0.8%, while Nasdaq futures were 0.9% firmer.

Sentiment was likely to be boosted by news that Democrats and Republicans have reached an agreement in principle over border security that will avert another partial government shutdown.

In addition, trade relations between the US and China were also in focus, with investors increasingly hopeful after White House counsellor Kellyanne Conway said President Trump wants to meet with Chinese President Xi Jinping "very soon" as the deadline on trade talks between the two nations looms.

Oanda analyst Craig Erlam said: "A deal to avoid another shutdown may resolve another unwanted distraction for the US but I'm not sure it was ever viewed as a major risk factor for the markets. They may be trading in the green ahead of the open but I don't think this is a game changer, unlike the negotiations with China. The escalation of the trade war between the two countries has undoubtedly been disruptive and remains a significant risk, with fears of recessions - both economic and earnings - very real and a major threat for markets.

"Success in these negotiations will provide a welcome distraction for Trump and his team and draw any attention away from the failure to secure the full funding for the wall. Officials are in Beijing this week and appear optimistic that a deal can be agreed by the end of this month, despite recent suggestions that the two sides remain far apart. From a markets perspective, we just need to avoid more tariffs so an extension to the 90-day truce will be encouraging and could keep investors on board."

In corporate news, Under Armour shares were likely to be active after the sportswear company's fourth-quarter earnings and sales surpassed analysts' expectations.

Elsewhere, brewer Molson Coors was also set to be in focus following the release of its fourth-quarter numbers.

On the macro front, the latest data from the National Federation of Independent Business showed that small business sentiment in the US deteriorated more than expected in January amid worries about the government shutdown and financial market instability.

The small business optimism index fell to 101.2 from 104.4 in December, missing expectations for a reading of 103.2. This marked the lowest level for the index since the weeks leading up to the 2016 elections and remains well below the historical average of 98.

"Business operations are still very strong, but small business owners' expectations about the future are shaky," said NFIB President and CEO Juanita D. Duggan.

"One thing small businesses make clear to us is their dislike for uncertainty, and while they are continuing to create jobs and increase compensation at a frenetic pace, the political climate is affecting how they view the future."

The NFIB's uncertainty index jumped seven points in January to 86, marking the fifth highest reading in the survey's 45-year history.

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