logo
Plus   Neg
Share
Email

Renewed Trade War Concerns Likely To Weigh On Wall Street

The major U.S. index futures are pointing to a notably lower opening on Friday following the mixed performance seen in the previous session.

Renewed trade war concerns are likely to weigh on the markets after President Donald Trump announced plans to impose a 25 percent tariff on $50 billion worth of Chinese goods that contain "industrially significant technologies."

"These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs," Trump said in a statement.

He added, "In addition, they will serve as an initial step toward bringing balance to the trade relationship between the United States and China."

Trump claimed he would impose additional tariffs on Chinese goods if China retaliates by imposing new tariffs on U.S. goods or services, raising non-tariff barriers, or taking punitive actions against American exporters.

However, China has already pledged to strike back quickly if the U.S. enacts protectionist measures that harm the country's interests.

"If the United States takes unilateral, protectionist measures that harm China's interests, we will quickly react and take necessary steps to safeguard our rights and interest," said Chinese Foreign Ministry Spokesman Geng Shuang.

Following the pullback seen late in the previous session, the major averages turned in a mixed performance during trading on Thursday. While the tech-heavy Nasdaq climbed to a new record closing high, the narrower Dow closed lower for the third straight day.

The Nasdaq advanced 65.34 points or 0.9 percent to 7,761.04. The S&P 500 also rose 6.86 points or 0.3 percent to 2,782.49, but the Dow edged down 25.89 points or 0.1 percent at 25,175.31.

The advance by the Nasdaq was partly due to continued strength among media stocks, with 21st Century Fox (FOXA) extending the strong upward seen in the previous session.

Fox moved notably higher after Comcast (CMCSA) announced a $65 billion bid for most of the company's media assets, igniting a potential bidding war with Disney (DIS).

Meanwhile, a notable decline by shares of General Electric (GE) weighed on the Dow, with the industrial conglomerate slumping by 1.8 percent.

The drop by GE came after CEO John Flannery told French Finance Minister Bruno Le Maire the company's commitment to create 1,000 jobs by the end of 2018 as part of its acquisition of Alstom's energy business is now out of reach.

Earlier in the day, buying interest was generated by the release of some upbeat economic data, including a report from the Commerce Department showing a much bigger than expected increase in retail sales in the month of May.

The Commerce Department said retail sales jumped by 0.8 percent in May after climbing by an upwardly revised 0.4 percent in April. Economists had expected retail sales to rise by 0.4 percent.

Excluding sales by motor vehicle and parts dealers, retail sales still surged up by 0.9 percent in May following a 0.4 percent increase in April. Ex-auto sales had been expected to climb by 0.5 percent.

A separate report from the Labor Department unexpectedly showed a modest decrease in initial jobless claims in the week ended June 9th.

The report said initial jobless claims edged down to 218,000, a decrease of 4,000 from the previous week's unrevised level of 222,000. Economists had expected initial jobless claims to inch up to 224,000.

Traders were also digesting the European Central Bank's highly anticipated monetary policy announcement, with the ECB revealing plans to wind down its massive bond-buying program.

The ECB said it plans to reduce the monthly pace of its net asset purchases to 15 billion euros from 30 billion euros after September before completely ending the program at the end of December.

Meanwhile, the ECB left interest rates unchanged and said it expects rates to remain at their present levels at least through the summer of 2019.

Most of the major sectors showed only modest moves on the day, contributing to the relatively lackluster close by the broader markets.

Utilities stocks showed a strong move to the upside, however, with the Dow Jones Utilities Average climbing by 1.3 percent. The average climbed further off the four-month closing low set on Monday.

Notable strength was also visible among gold stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Gold Bugs Index. The strength in the sector came amid an increase by the price of gold.

Biotechnology, telecom, and real estate stocks also saw some strength on the day, while banking stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are slipping $0.21 to $66.68 a barrel after rising $0.25 to $66.89 a barrel on Thursday. Meanwhile, after climbing $7 to $1,308.30 an ounce in the previous session, gold futures are slumping $11.20 to $1,297.10 an ounce.

On the currency front, the U.S. dollar is trading at 110.49 yen compared to the 110.63 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1595 compared to yesterday's $1.1568.

Asia

Asian stocks turned in a mixed performance on Friday in response to a dovish European Central Bank statement and the Bank of Japan's weaker view on the inflation outlook. Trade concerns persisted ahead of likely announcement of U.S. tariffs on Chinese goods.

The euro extended declines against the dollar after the ECB indicated plans to wind down its bond-buying program and pledged to keep interest rates on hold for at least a year.

Chinese shares hit a 20-month low on worries that rising trade tensions could add pressure to the country's economic growth.

The benchmark Shanghai Composite Index fell 21.23 points or 0.7 percent to 3,022.93, its lowest level since September of 2016 as the U.S. prepared to impose "pretty significant" tariffs on Chinese goods.

Hong Kong's Hang Seng Index dropped 130.6 points or 0.4 percent to 30,309.49 despite Fitch Ratings affirming the country's sovereign ratings of with a 'stable' outlook.

In another development, the nation's central bank adjusted its interest rate upward after the U.S. Federal Reserve hiked its key rate by a quarter point.

Meanwhile, Japanese shares rose and the yen weakened after the Bank of Japan kept its monetary policy steady, as widely expected, and downgraded its view on inflation. The Nikkei 225 Index climbed 113.14 points or 0.5 percent to 22,851.75, while the broader Topix Index closed 0.3 percent higher at 1,789.04.

Fast Retailing, Mitsui Mining & Smelting, Fujitsu, Daiichi Sankyo, TDK and Taiyo Yuden were among the prominent gainers.

Australian shares rose sharply to reach a one-month high as a surge in iron ore prices helped lift mining stocks and banks also recovered from recent losses.

The benchmark S&P/ASX200 Index rallied 77.40 points or 1.3 percent to 6,094, while the broader All Ordinaries Index jumped 1.2 percent at 6,205.30.

BHP Billiton rose half a percent after the mining giant unveiled plans to develop its majority-owned South Flank iron ore mine in Western Australia. Rio Tinto, South32 and Fortescue Metals Group climbed 1-2 percent.

Gold miner Evolution Mining advanced 1.4 percent and Newcrest Mining jumped 2.5 percent after gold prices rose to a one-month high.

Energy stocks Oil Search, Origin Energy, Woodside Petroleum and Santos also climbed 1-3 percent after an increase in crude oil prices. Banks ANZ, Commonwealth and Westpac rallied around 2 percent each.

Biotechnology and medical device company Sirtex Medical soared 4.6 percent after it accepted a A$1.87 billion takeover offer from China's CDH Genetech.

Europe

European stocks have moved mostly lower on Friday on renewed trade worries after President Donald Trump announced plans to impose a 25 percent tariff on $50 billion worth and China pledged to retaliate with tariffs of its own.

While the French CAC 40 Index is nearly flat, the German DAX Index is down by 0.5 percent and the U.K.'s FTSE 100 Index is down by 0.9 percent.

Novartis has moved higher after its unit Sandoz has announced the presentation of two long-term, Phase III studies: one each for biosimilar Zessly or infliximab and biosimilar Erelzi or etanercept.

Dassault Systèmes has also risen in Paris after the company said it is initiating a 2018-2023 plan to double its non-IFRS earnings per share.

Tesco shares have rallied after the retailer delivered positive like-for-like sales growth for a tenth consecutive period in the first quarter.

Rolls Royce Holdings has also soared. The jet-engine manufacturer said that it is well placed to exceed free cash flow of 1 billion pounds by 2020.

On the other hands, shares of H&M Group have slumped after the clothing group reported muted second quarter sales growth.

Meanwhile, German lender Commerzbank and Deutsche Bank have fallen as government bond yields extend declines on the back of dovish signals from the ECB.

Miner and commodities trader Glencore has also dropped in London after settling a legal dispute in the Democratic Republic of Congo.

Regional automakers are trading mixed after industry data showed European passenger car sales grew only 0.8 percent year-on-year in May, following a 9.6 percent spike in April.

In economic news, Eurozone consumer prices increased as estimated in May, final data from Eurostat revealed.

Inflation rose to 1.9 percent in May from a revised 1.3 percent in April. A similar high rate was last seen in April 2017. The latest rate matched the initial estimate released on May 31st.

Germany's central bank downgraded its growth outlook for this year as exports and business investment are expected to be less strong. The economy is forecast to grow 2 percent this year instead of the 2.5 percent projected in December.

Meanwhile, the projection for 2019 was raised to 1.9 percent from 1.7 percent.

U.S. Economic Reports

Growth in New York manufacturing activity unexpectedly accelerated in the month of June, according to a report released by the Federal Reserve Bank of New York.

The New York Fed said its general business conditions index climbed to 25.0 in June from 20.1 in May, with a positive reading indicating growth in regional manufacturing activity.

The increase by the headline index came as a surprise to economists, who had expected the index to edge down to 19.0.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of May. Industrial production is expected to rise by 0.2 percent in May after climbing by 0.7 percent in April.

The University of Michigan is due to release its preliminary report on consumer sentiment in the month of June at 10 am ET. The consumer sentiment index is expected to inch up to 98.5 in June after dipping to 98.0 in May.

At 12:30 pm ET, Dallas Fed President Robert Kaplan is scheduled to participate in a moderated Q&A at the Fort Worth Chamber of Commerce's Leaders in Business event in Fort Worth, Texas.

Stocks In Focus

Shares of Adobe Systems (ADBE) are moving notably lower in pre-market trading after the software company reported better than expected fiscal second quarter earnings and sales but a weaker than expected operating profit margin.

Fiber optic component supplier Finisar (FNSR) may also come under pressure after reporting fiscal fourth quarter results that came in below analyst estimates.

On the other hand, shares of Jabil (JBL) are likely to see early strength after the manufacturing services provider reported fiscal third quarter earnings that exceeded expectations and announced an additional $350 million share repurchase program.

Luxury apparel maker Canada Goose (GOOS) is moving sharply higher in pre-market trading after reporting an unexpected fiscal fourth quarter profit.

For comments and feedback contact: editorial@rttnews.com

Follow RTT