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Top 5 Things to Know in the Market on Tuesday

Published 11/05/2019, 07:29 PM
Updated 11/05/2019, 07:46 PM
© Reuters.

© Reuters.

Investing.com -- The U.S. may be prepared to cancel some of its tariffs on Chinese imports to secure a trade truce, Uber (NYSE:UBER) continues to hemorrhage cash and OPEC trims its long-term forecasts for oil demand in its annual report. Here's what you need to know in financial markets on Tuesday, 5th November.

1. U.S. to give ground on tariffs?

The U.S. may roll back some of the tariffs it imposed on Chinese imports in the course of the last 18 months in order to secure a temporary truce in its trade war with China, according to reports in the Financial Times and Wall Street Journal.

The newspapers both reported that Washington may annul the 15% tariff on goods including apparel, flatscreen monitors and other electrical appliances in September, in return for ‘beefed up commitments’ on respecting intellectual property rights and purchases of U.S. agricultural products.

Overnight, Chinese markets leaped as the central bank cut its one-year interest rate for the first time in three years to relieve a worsening liquidity situation in the local bond market. At the same time, President Xi Jinping promised that China would open its doors “ever wider” to global trade, but said nothing specific about the proposed deal with the U.S. The yuan responded by rising through 7 to the dollar for the first time since August.

2. Stocks to open higher

U.S. stock markets are set to extend their recent gains at the opening, on the back of Xi’s comments and the reports about the U.S.’s willingness to roll back tariffs.

By 6:30 AM ET (1100 GMT), Dow futures were up 61 points or 0.2%, while S&P 500 Futures and Nasdaq 100 futures were both up in line.

The trade détente is coming just at the right time: As of November 1, the blended earnings decline for the third quarter for the S&P 500 stood at -2.7%, according to FactSet. If that’s still the case at the end of the season, it will mark the first time the index has reported three straight quarters of year-over-year declines in earnings since the middle of 2016. It will also mark the largest year-over-year decline in earnings since Q2 2016, when earnings were down 3.2%.

The day’s earnings roster is headed by medical device maker Becton Dickinson, Allergan, gold miner Newmont Goldcorp, Tinder owner Match Group, Regeneron Pharma and aluminium products group Arconic.

3. Uber's still bleeding

Uber (NYSE:UBER) reported another thumping loss at the basic operating level, again raising questions over its path to profitability. The company lost $1.2 billion before interest, taxes, depreciation and amortization. That’s scarcely any improvement from the $1.3 billion it lost in the second quarter (excluding $3.9 billion in non-cash costs from its IPO).

CEO Dara Khoshroshahi said the company expects to be profitable on an EBITDA level in 2021, but investors were unconvinced and pushed the shares down 5.5% in after-hours trading. A 60% increase in EBITDA losses at Uber (NYSE:UBER) Eats, in line with its revenue growth, looked uncomfortably similar to WeWork’s failure to grow its way out of operating losses, and comes against the background of dire outlooks for the food delivery business from Grubhub.

4. Trade balance, JOLTS and services surveys due

It’s a relatively busy day for economic data, with various surveys of the non-manufacturing sector’s health leading the way. Figures for the U.S. trade balance in September come out at 8:30 AM ET (1330 GMT), and will be followed by the Fed’s Redbook survey of large retailers at 8:55 AM.

They’ll be followed by IHS Markit’s service sector and composite purchasing managers indices for October at 9:45 AM, and then the Institute of Supply Management’s non-manufacturing survey 15 minutes later.

There’ll also be speeches from Richmond Fed President Thomas Barkin at 8 AM ET and Dallas Fed President Robert Kaplan at 12:40 PM ET.

5. OPEC lowers long-term oil demand forecasts

OPEC has lowered its forecasts for long-term growth in oil demand to 104.8 million barrels a day by 2024, and 110.6 million b/d by 2040.

Demand will slow to around 500,000 b/d toward the end of the 2020s, it said in its annual World Oil Outlook. That’s barely one-third of last year’s 1.4 million b/d growth.

The cartel also indicated its own hold on the market would weaken over the next five years, as its output of crude and other liquids falls to some 32.8 million b/d by 2024 from 35 million b/d today.

U.S. crude oil futures rose 0.8% to a six-week high on the report. The market’s next test comes at 4:30 PM with the American Petroleum Institute’s weekly report on U.S. oil supplies.

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