Global stocks traded mixed Tuesday as investors prepped for a series of potential risk events later in the week, as well as the start of the U.S. earnings season, amid questions over the fate of a U.S. China trade deal and the health of the world economy.
The International Monetary Fund will update its World Economic Outlook report later today as part of its Spring Meetings in Washington, with analysts expecting notable downgrades for global growth forecasts amid the ongoing trade dispute between the U.S. and China.
The European Central Bank will hold a rare Wednesday policy meeting in Frankfurt this week, the same day the Federal Reserve will release minutes of its March interest rate decision, with investors looking to both for clues for the next move in the world's two biggest economic blocs, the former of which is flirting on the edge of recession while the later is growing at a 2.1% clip but is facing pressure from President Donald Trump to lower interest rates and re-start quantitative easing.
Against that near-term backdrop, as well as the start of the corporate earnings season later this week, U.S. equity futures suggest a muted start to the trading day, with contracts tied to the Dow Jones Industrial Average indicating a 48 point pullback and those linked to the S&P 500 suggesting a 4.3 point slide after snapping a seven-day winning streak on Monday.
Around eight S&P 500 companies are set to report this week, including three of the country's biggest banks on Friday, as the first quarter earnings season kicks into high gear on the heels of solid job creation data at home and weakening economic signals from around the world.
Refinitiv estimates suggest first quarter profits for the S&P 500 will likely fall by 2.2% compared to the first three months of 2018, with revenues sliding by around 5%.
Investors, however, will likely be more focused on near-term estimates from the benchmark's biggest companies as they calibrate the chances of a so-called earnings recession, which occurs when profits decline for two consecutive quarters. At present, the estimated second quarter earnings growth rate is 2.8%.
European stocks continue to be weighed by a cautious sentiment heading into both the ECB meeting Wednesday, which could include some details of a policy response to weakening growth in Germany and France, and a key summit of European Union leaders and U.K. Prime Minister Theresa May, also on Wednesday, which will decide if her second request for a Brexit extension will be granted or if Britain will crash out of the bloc as scheduled on April 12.
The pound continues to trade with uncertainty around the potential Brexit outcomes, as well as the political developments in London, where Conservative party lawmakers are planning another vote of confidence in the Prime Minister as she attempts to broker a way out of the economically damaging impasse with opposition leader Jeremy Corbyn.
Markets in Asia were able to book modest gains on the session, however, with support from planned China stimulus that include target reductions in the so-called reserve requirement ratio of the country's banks. The move would ostensibly free up capital in order to increase lending and stoke growth in the world's second largest economy.
The region-wide MSCI Asia ex-Japan benchmark added 0.32% on the session to trade near the highest level in seven months while the Nikkei 225 in Tokyo closed 0.19% higher at 21,802.59 points.
Global oil prices eased from the five months highs they touched yesterday, although markets are still keeping a keen eye on developments in Libya, where fighting between the National Army and rebel troops continues near the capital of Tripoli and threatens to disrupt supply from the country's crucial oil industry, which produces around 1.1 million barrels each day.
Brent crude contracts for June delivery, the global benchmark for oil prices, were marked 2 cents lower from their Tuesday close in New York and changing hands at $71.08 per barrel while WTI contracts for May delivery were seen 8 cents higher at $64.48 per barrel.