Europe, Asia lead global stock markets higher, but nerves still simmer

U.S. stock indexes are down but trading relatively mixed, while the S&P/TSX Composite was a tad higher in late-morning trading on Friday, as concerns linger about China-U.S. trade issues and how their unresolved issue could make matters worse for the global economy.

The Dow Jones Industrial Average was down 22 points, or 0.1%, to 25,759, the S&P 500 was down 0.08% to 2,804, and the Nasdaq Composite was down 0.02% to 7,905.

The GDP Report, Friday’s S&P E-mini futures and the pre-market futures for the S&P 500 all reached their two-week highs on Thursday. An unexpected drop in retail sales Thursday afternoon didn’t exactly help the sentiment.

Ahead of Friday’s non-farm payrolls report, a quiet start to the day on Wall Street, with the markets anticipating payrolls growth of 150,000, compared to expected 180,000, is creating some cautiousness. The ADP employment report showed a smaller than expected 217,000 addition of jobs for the private sector in February. That wasn’t something to make the markets giddy, though the headline number took some of the sting out of the ADP report.

The bigger concern is the slowdown in U.S. export growth, which has been brought about by a strengthening U.S. dollar. With currency pressures increasing, those worries have contributed to doubts about whether the tariffs imposed by the U.S. have the desired effect.

Traders might also be taking a closer look at the global scenario. U.S. companies are being pulled into the China trade war. Sure, Dow stocks have been reeled in, with a steep fall in Caterpillar after news broke it had been the latest company to ship equipment to China via a middleman and instead of directly buying it.

But it’s not just Caterpillar, or United States Steel, for that matter. Canadian firms are part of that growing list.

At the heart of the issues is China’s ban on American companies’ doing business in China without a tax rate cut in exchange for that country’s buying more of U.S. goods. Last November, a $200 billion U.S. trade bill failed to get through the Senate, but was roundly criticized for the proposed tariff increases.

Both Canada and Europe have rallied against the tariffs, but Canada appears the most unlikely to join them. Because of the trade deal between Canada and the U.S., Ottawa was coerced into helping the U.S. negotiate its trade deal with Mexico, as opposed to holding out for closer ties to the E.U. The proposed tariffs are being opposed by the E.U., but President Trump has been encouraging Canadian Prime Minister Justin Trudeau to take a harder line.

Traders might want to keep an eye on that trade deal, or the task of boosting U.S. exports if the tariffs do get passed. They’d better be ready to react to geopolitical moves that create volatility.

With the markets looking somewhat subdued, ahead of the release of the Non-Farm Payrolls report at the close of trading, ADP employment is one report of note on Friday’s agenda. Some analysts don’t expect the numbers to be able to speak the jobs needs, as there is so much uncertainty surrounding the tariffs, so ADP won’t be able to avoid this volatility altogether.

Follow Vancouver-based analyst Sean Trippitt on twitter @seantrippt

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