European stock markets edged higher yesterday, while the pound hit the lowest level versus the dollar in more than two years on Brexit deadlock.
Wall Street stocks, which had set new records as an expected Fed interest rate cut continued to fuel optimism, slipped at the opening bell as earnings season entered full swing.
The muted open came despite top banks JPMorgan Chase, Goldman Sachs, and Wells Fargo beating earnings expectations, as did consumer and medical goods firm Johnson & Johnson.
“The takeaway from the subdued response to the earnings news is that the good earnings news was already priced in,” said market analyst Patrick O’Hare at Briefing.com.
He pointed to a drop in JP Morgan’s shares in pre-market trading as the bank cut its forecast for net interest income – the difference between the interest rates it charges consumers for loans and the interest it must pay for deposits.
“The post-report weakness in an industry behemoth like JPMorgan Chase has taken some wind out of the market’s sails,” said Mr O’Hare.
Corporate profits are expected to be broadly lower owing largely to a global slowdown and trade war between the US and China.
A Chinese official yesterday rejected claims from US President Donald Trump that Beijing is being forced to make a trade deal because of its slowing economy, as the two sides prepare for more talks.
US Treasury Secretary Steven Mnuchin on Monday said that top American and Chinese trade negotiators were due to speak by telephone in the coming days, but no face-to-face talks have been scheduled yet.
Dealers are also keeping an eye on Beijing to see if it unveils any economic stimulus as data on Monday showed second-quarter growth at its weakest pace for almost three decades.
Asian equities closed mixed, with investors taking a breather after a recent rally.
In London, shares in Burberry shot up 12 per cent after the British luxury fashion house reported a rise in first-quarter sales on strong growth in China and thanks to a Brexit-fuelled weak pound enticing Asian tourists to snap up its goods during trips to the UK.
The pound, meanwhile, continued to suffer yesterday despite data confirming low United Kingdom unemployment.
Sterling slumped to $1.2408, the lowest level since April 2017.
The euro climbed to 90.42 pence, the European single currency’s highest level versus sterling since January.
“Unfortunately, traders are finding it hard to look past no-deal risks or at the very least a delay and hard Brexit, which continues to weigh on the currency,” said Craig Erlam, senior market analyst at Oanda trading group.