Market Analysis

Beyond the Numbers

Trump’s Tough Trade Talk May Generate Selling Pressure
5/9/2019 9:09 AM

The major U.S. index futures are pointing to a lower opening on Thursday, with stocks likely to extend the sharp pullback seen late in the previous session.

The downward momentum on Wall Street reflects renewed trade concerns following tough talk from President Donald Trump ahead of two days of U.S.-China trade talks in Washington.

Trump claimed during a rally in Florida on Wednesday that the U.S. is planning to raise tariffs on China’s goods because China “broke the deal.”

“So they're flying in, the vice premier tomorrow is flying in — good man — but they broke the deal,” Trump told his supporters. “They can't do that, so they'll be paying.”

The comments from Trump come as Chinese Vice Premier Liu He is set to take part in the latest round of trade talks as officials from the world’s two largest economies attempt to reach an historic trade agreement.

Analysts have previously urged investors to focus on Trump’s actions rather than his words, suggesting that the president’s bluster is merely a negotiating tactic.

Stocks moved modestly higher over the course of the trading session on Wednesday but pulled back sharply going into the close. The volatility on the day came on the heels of the steep drop seen on Tuesday.

The major averages ended the day mixed, as the Dow managed to hold on to a slim gain. While the Dow inched up 2.24 points or less than a tenth of a percent to 25,967.33, the Nasdaq fell 20.44 points or 0.3 percent to 7,943.32 and the S&P 500 dipped 4.63 points or 0.2 percent to 2,879.42.

The late-day pullback on Wall Street reflected uncertainty ahead of a crucial round of trade talks between the U.S. and China in the coming days.

The markets had earlier benefited from optimism about the talks after White House Press Secretary Sarah Sanders told reporters there are "indications" the Chinese would like to strike a deal, reiterating a claim President Donald Trump made on Twitter.

Trump noted Chinese Vice Premier Liu He will be a part of the talks, claiming the high-ranking official is "coming to the U.S. to make a deal."

"We'll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers...great for U.S., not good for China!" Trump tweeted.

Trump also claimed China is attempting to pull back from previously negotiated terms of a trade deal in order to strike a new deal with a Democratic president that continues to rip off the U.S.

Meanwhile, China's Commerce Ministry said the communist country will take "necessary countermeasures" if the U.S. follows through on a planned increase in tariffs on Chinese goods on Friday.

Most of the major sectors ended the day showing only modest moves, although gold stocks showed a significant move to the downside, dragging the NYSE Arca Gold Bugs Index down by 1.8 percent. The weakness in the gold sector came amid a decrease by the price of the precious metal.

Considerable weakness was also visible among utilities stocks, with the Dow Jones Utility Average falling by 1.2 percent to a two-month intraday low.

Tobacco, housing, and brokerage stocks also saw notable weakness on the day, while natural gas stocks moved to the upside.

Commodity, Currency Markets

Crude oil futures are sliding $0.50 to $61.62 a barrel after climbing $0.72 to $62.12 a barrel a barrel on Wednesday. Meanwhile, an ounce of gold is trading at $1,282.60, up $1.20 compared to the previous session's close of $1,281.40. On Wednesday, gold dipped $4.20.

On the currency front, the U.S. dollar is trading at 109.77 yen compared to the 110.10 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1197 compared to yesterday’s $1.1192.


Asian shares tumbled on Thursday as investors waited to see if the U.S. and China can strike a trade deal during two days of talks in Washington starting later in the day.

Underlying sentiment turned cautious after U.S. President Donald Trump said he would be happy to keep tariffs on Chinese imports, while Beijing announced it would take “necessary countermeasures.”

China's Shanghai Composite Index slumped 42.80 points or 1.5 percent to 2,850.95 amid heightened trade tensions, while Hong Kong's Hang Seng Index plunged 692.13 points or 2.4 percent to 28,311.07.

Chinese consumer price inflation rose to a six-month high in April, while producer price inflation increased at the fastest pace in four months, data from the National Bureau of Statistics revealed today.

The consumer price index rose 2.5 percent year-on-year in April following a 2.3 percent increase in March. The producer price index rose an annual 0.9 percent in the month compared to a 0.4 percent increase in March.

Separately, central bank data showed that new loans given by Chinese banks totaled 1.02 trillion yuan in April, well below analysts' expectations and March's 1.69 trillion yuan.

Japanese shares fell for the fourth straight session to hit a six-week low as the yen remained well bid against the dollar on safe-haven demand.

The Nikkei 225 Index dropped 200.46 points or 0.9 percent to 21,402.13, its lowest level since March 29. The broader Topix closed 1.4 percent lower at 1,550.71.

China-related stocks underperformed, with Fanuc, Komatsu and Kawasaki Kisen plummeting 4-6 percent.

SoftBank Corp advanced 0.7 percent after the telecom firm said it would spend $4 billion to raise its stake in Yahoo Japan Corp. Shares of the latter soared 9.4 percent

Australian markets eked out modest gains, with telecom companies leading the surge. The benchmark S&P/ASX 200 Index rose 26.20 points or 0.4 percent to 6,295.30, while the broader All Ordinaries Index ended up 25.50 points or 0.4 percent at 6,377.30.

TPG Telecom edged up slightly to recover some of its losses from the previous session after a planned $7.7 billion merger of Vodafone Group Plc's struggling Australian business with TPG Telecom Ltd. was blocked by the country's anti-trust regulator. Telstra shares advanced 2.7 percent and Vocus Group added 1.6 percent.

Miners BHP, Rio Tinto and Fortescue Metals Group dropped around half a percent, while energy stocks such as Woodside Petroleum, Oil Search and Santos climbed around 2 percent after oil prices rose more than 1 percent overnight.

Bulk grain handler Graincorp slumped 4.3 percent after it posted a half-year underlying loss after tax of A$48 million. Airline Qantas Airways rallied 2.2 percent after it forecast record annual revenue.

Seoul stocks nosedived and the Korean won hit a more than two-year low as investors awaited the outcome of U.S.-China trade negotiations in Washington.

The benchmark Kospi plunged 66 points or 3 percent to 2,102.01, extending losses for the fourth straight session and hitting its lowest level since January 15. Hyundai Motor, LG Chem, Samsung Electronics and SK Hynix fell 3-5 percent.


European stocks have retreated on Thursday amid fears that the U.S.-China trade conflict could escalate.

After U.S. President Donald Trump threatened to levy additional tariffs on Chinese goods, Beijing said it would retaliate with “necessary countermeasures.”

As hopes for a trade resolution wane, China's Vice Premier and top trade official Liu He will arrive in Washington later today for two days of talks.

While the French CAC 40 Index has tumbled by 1.4 percent, the German DAX Index is down by 1 percent and the U.K.’s FTSE 100 Index is down by 0.4 percent.

Tariff worries have pulled down automakers, with BMW, Daimler, Volkswagen, Renault and Peugeot posting notable losses.

ArcelorMittal has also come under pressure after the world's largest steelmaker said it expects lower demand for the rest of 2019.

Italian bank Banco BPM has also plunged after reporting a halving of loan-loss provisions for the first quarter.

Germany's Metro AG has also moved sharply lower on the day after its fiscal second quarter net loss widened.

Continental AG has also tumbled. The automotive manufacturing company reported a 22 percent drop in first quarter net profit.

On the other hand, Acacia Mining has rallied after reporting a surge in April gold output and backing its full-year production outlook.

Online grocer Ocado has also shown a notable move to the upside after it bought a minority stake in robotics start-up Karakuri.

Defense contractor Rheinmetall has also risen after company confirmed its full-year outlook after reporting a rise in first quarter earnings and sales.

U.S. Economic Reports

With imports rising by slightly more than exports, the Commerce Department released a report showing the U.S. trade deficit widened in the month of March.

The report said the trade deficit widened to $50.0 billion in March from a revised $49.3 billion in February. Economists had expected the deficit to widen to $50.2 billion.

The wider trade deficit came as the value of imports surged up by 1.1 percent to $262.0 billion compared to a 1.0 percent jump in the value of exports to $212.0 billion.

The Labor Department also released a report showing producer prices increased in line with economist estimates in the month of April.

The report said producer price index for final demand rose by 0.2 percent in April after climbing by 0.6 percent in March. The uptick in prices matched expectations.

Excluding food and energy prices, core producer prices inched up by 0.1 percent in April after rising by 0.3 percent in March. Economists had expected core prices to edge up by 0.2 percent.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits pulled back by less than expected in the week ended May 4th.

The Labor Department said initial jobless claims dipped to 228,000, a decrease of 2,000 from the previous week’s unrevised level of 230,000. Economists had expected jobless claims to drop to 220,000.

At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of March. Wholesale inventories are expected to be unchanged.

Atlanta Federal Reserve President Raphael Bostic is due to deliver a speech about the economic outlook and monetary policy at the Louisiana Bankers Association's 119th Annual Convention and Exposition in New Orleans, Louisiana, at 10:45 am ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $19 billion worth of thirty-year bonds.

Chicago Fed President Charles Evans is due to give remarks at a Community Development Research Conference in Washington, D.C. at 1:15 pm ET.

Stocks In Focus

Shares of Stamps.com (STMP) are plummeting in pre-market trading after the online postage provider reported better than expected first quarter results but lowered its full-year forecast.

Online crafts marketplace Etsy (ETSY) could also see initial weakness after reporting first quarter earnings that beat analyst estimates but on weaker than expected sales.

Shares of e.l.f. Beauty (ELF) may also come under pressure after the cosmetics company reported fiscal fourth quarter results that exceeded expectations but provided disappointing guidance.

On the other hand, shares of Tapestry (TPR) are moving sharply higher in pre-market trading after the luxury accessories maker reported fiscal third quarter earnings that beat estimates and announced a $1 billion stock buyback.

Fox Corp. (FOXA) may also see initial strength after reporting better than expected results in its first quarter as a stand-alone company.
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