Market Analysis

Beyond the Numbers

Trump Comments About Trade Deal May Spark Initial Sell-Off On Wall Street
12/3/2019 8:54 AM

The major U.S. index futures are pointing to a sharply lower opening on Tuesday, with stocks likely to extend the pullback seen over the two previous sessions.

Renewed trade concerns may weigh on the markets after President Donald Trump suggested he might prefer to wait until after the 2020 elections to strike a trade deal with China.

Trump told reporters at a NATO summit in London there is no deadline to reach a trade deal, adding, “In some ways, I think it’s better to wait until after the election.”

“But they want to make a deal now, and we’ll see whether or not the deal’s going to be right; it’s got to be right,” Trump said.

Trump claimed a potential trade deal is only dependent on whether he wants to sign it, because the U.S. is “doing very well” and China is “having by far the worst year that they have had in 57 years.”

The comments from the president added to rising trade concerns after his administration threatened to impose duties of up to 100 percent on $2.4 billion in French imports, including champagne and handbags.

The threat comes after the administration concluded France’s new digital services tax discriminates against U.S. companies such as Google (GOOGL), Apple (AAPL), Facebook (FB), and Amazon (AMZN).

Nonetheless, overall trading activity may be somewhat subdued, with a lack of major U.S. economic data keeping some traders on the sidelines.

Traders may also be reluctant to make significant moves ahead of the release of the closely watched monthly jobs report on Friday.

Stocks showed a notable move to the downside during trading on Monday, extending the pullback seen on Friday. With the drop on the day, the major averages pulled back further off the record highs set last Wednesday.

The Dow ended the day just off its lows of the session, down 268.37 points or 1 percent at 27,783.04, while the Nasdaq tumbled 97.48 points or 1.1 percent to 8,567.99 and the S&P 500 slumped 27.11 points or 0.9 percent to 3,113.87.

The continued weakness on Wall Street came following the release of a report from the Institute for Supply Management showing a continued contraction in U.S. manufacturing activity in the month of November.

The ISM said its purchasing managers index edged down to 48.1 in November from 48.3 in October, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to inch up to 49.2.

"November was the fourth consecutive month of PMI contraction, at a faster rate compared to the prior month," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee. "Global trade remains the most significant cross-industry issue."

A separate report released by the Commerce Department showed an unexpected decrease in U.S. construction spending in the month of October.

The disappointing U.S. economic news offset earlier positive sentiment generated by some upbeat Chinese manufacturing data.

Traders were also reacting to President Donald Trump announcing plans to reinstate tariffs on metal imports from Brazil and Argentina.

"Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers," Trump said in a post on Twitter.

He added, "Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries."

Software, semiconductor and networking stocks turned in some of the market's worst performances on the day, contributing to the steep drop by the tech-heavy Nasdaq.

The Dow Jones U.S. Software Index, the Philadelphia Semiconductor Index and the NYSE Arca Networking Index slumped by 1.5 percent.

Significant weakness also emerged among commercial real estate stocks, as reflected by the 1.5 percent drop by the Dow Jones U.S. Real Estate Index.

Telecom, chemical, and natural gas stocks also saw notable weakness on the day, while steel stocks were among the few groups to buck the downtrend.

Commodity, Currency Markets

Crude oil futures are falling $0.53 to $55.43 a barrel after climbing $0.79 to $55.96 a barrel on Monday. Meanwhile, after slipping $3.50 to $1,469.20 an ounce in the previous session, gold futures are jumping $10.70 to $1,479.90 an ounce.

On the currency front, the U.S. dollar is trading at 108.72 yen compared to the 108.98 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1070 compared to yesterday’s $1.1079.


Asian stocks fell broadly on Tuesday after the Trump administration announced plans to reinstate tariffs on metal imports from Brazil and Argentina and proposed retaliatory tariffs against France for its new digital services tax.

Weak U.S. manufacturing data and worries that the U.S. could re-escalate trade tensions with China also kept investors nervous.

Chinese shares rose as investors picked up beaten-down stocks with low valuations. The benchmark Shanghai index briefly hit a more than three-month low before reversing course to end the session up 8.89 points, or 0.3 percent, at 2,884.70.

Hong Kong's Hang Seng Index fell 53.42 points, or 0.2 percent, to 26,391.30 after a government report showed the country's retail sales fell for the ninth straight month in October.

Japanese shares retreated on fresh concerns about global trade. Weak U.S. manufacturing data also weighed on markets. The Nikkei 225 Index ended down 149.69 points, or 0.6 percent, at 23,379.81, while the broader Topix closed 0.5 percent lower at 1,706.73.

Defensive shares paced the declines, with Kikkoman Corp. and Nisshin Group falling around 3 percent. Drugmaker Astellas Pharma dropped 1.1 percent after it agreed to acquire Audentes Therapeutics Inc. for about $3 billion in cash. Baby goods maker Pigeon plummeted 13.8 percent after slashing its annual outlook.

Australian markets posted their biggest intraday percentage loss in two months as fresh trade jitters put investors on the defensive.

The benchmark S&P/ASX 200 Index slumped 150 points, or 2.2 percent, to 6,712.30, while the broader All Ordinaries Index plunged 146.90 points, or 2.1 percent, to 6,818.40.

Mining heavyweights BHP and Rio Tinto declined 1.4 percent and half a percent, respectively after the release of weak U.S. manufacturing data and the tariff imposition on Brazilian and Argentinean steel.

The big four banks fell 1-3 percent as the Reserve Bank of Australia left its key interest rate unchanged and said it prefers to "wait and assess" the impact of the three cuts delivered since June.

Healthcare stocks also ended deep in the red, with heavyweight CSL losing 2.9 percent and Cochlear declining 2 percent.

Metcash dropped 1.4 percent after saying it would record a A$237.4 million write-down against its major food division.

Treasury Wine Estates tumbled 3 percent after it appointed the former chief financial officer of Aristocrat Leisure Toni Korsanos as an independent non-executive director.

Investors ignored official data showing that Australia logged a current account surplus for the second consecutive quarter in the three months to September.

South Korea's Kospi declined 7.85 points, or 0.4 percent, to close at 2,084.07. The country's economic growth slowed as initially estimated in the third quarter on weaker construction activity, revised data from the Bank of Korea showed.

GDP grew 0.4 percent sequentially, in line with the advance estimate, but slower than the 1 percent expansion seen in the second quarter.


European stocks are turning in a mixed performance on Tuesday amid fresh concerns about global trade after President Donald Trump suggested a U.S.-China trade deal could be delayed until after the 2020 elections.

China will soon release its so-called "unreliable entity list," imposing sanctions against those who harm China's interests, the business news arm of the country's nationalist tabloid Global Times said in a tweet early Tuesday morning.

Meanwhile, the Trump administration proposed slapping punitive duties of up to 100 percent on $2.4 billion on imports of French Champagne, handbags, cheese and other products, saying a new French tax that hit American technology companies discriminated against the United States.

While the German DAX Index is up by 0.1 percent, the French CAC 40 Index is down by 1 percent and the U.K.’s FTSE 100 Index is down by 1.6 percent.

Luxury stocks have fallen the most in Paris, hit by the U.S. tariff threat. LVMH, Kering and Hermes International are posting notable losses.

Miners Anglo American, Antofagasta and Glencore have also fallen on worries that the U.S. could re-escalate trade tensions with China.

Ferguson, a specialist distributor of plumbing and heating products, has also slumped after saying it was on track to split off its U.K. business.

On the other hand, shares of Centamin have soared after the gold miner became the target of a hostile takeover bid.

Canada's Endeavour announced the terms of its proposal in order to allow Centamin shareholders the opportunity to consider the proposal and encourage the Centamin board to engage with Endeavour on the prospects for a friendly recommended merger.

Budget airline Ryanair Holdings has also advanced as it reported group traffic of 11 million customers for November 2019, up 6 percent from the prior year.

Italy's biggest bank UniCredit has also risen after announcing a share buyback and unveiling a new plan to cut costs.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today as traders look ahead to the closely watched monthly jobs report due on Friday.

Stocks In Focus

Shares of Coupa Software (COUP) are seeing significant pre-market weakness even though the enterprise software maker reported third quarter results that beat analyst estimates on both the top and bottom lines.

Chipmakers such as Nvidia (NVDA), Advance Micro Devices (AMD) and Microchip Technology (MCHP) may also come under pressure amid concerns about developments on the trade front.

On the other hand, shares of Lands’ End (LE) are likely to see initial strength after the apparel and accessories retailer reported better than expected third quarter earnings.
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