Every market participant knew this day was coming; trade tensions return to the forefront. While acquisitions relevant to U.S. and China trade negotiations stemming from Larry Kudlow’s interview escalated overnight, the White House Chief Economic Advisor, the true burden is a weakening Chinese yuan and the EU preparing a list of countermeasures to U.S. tariffs on European autos.
Equity markets have softened from Sunday night. The Nasdaq plunged just ahead of settlement after Netflix missed subscriber growth expectations. However, it wasn’t all bad news heading into the close as the Russell 2000 halved a loss of 1% in the last hour. While many sectors notched losses, it was the banks that lifted more than their weight with Bank of America +4.3%, JP Morgan +3.97%, Citigroup +3.67% and Wells Fargo +2.94%.
Global equity markets were mostly mixed while the Dollar dipped ahead of Fed Chair Jerome Powell’s first Congressional testimony later today. Powell’s testimony could offer investors a fresh opportunity to appraise the Federal Reserve’s monetary policy approach for the second half of 2018. The central bank head is expected to reiterate that the Federal Reserve remains committed to gradual monetary policy tightening.
Today’s meeting between President Trump and Russian President Putin is more symbolic than anything. Sanctions, the U.S election meddling and Syria are expected topics, but we are unlikely to find real substance coming from this headline-grabbing summit. Earnings and economic data are the headlines we are paying attention to most closely this morning.
The S&P 500 closed at the highest level since Feb. 1 for the second time this week and extended gains overnight, this is surely a breakout isn’t it? Not so fast, we will discuss this in the technical section below. Global equity markets are all higher and being led by the Nikkei, which is up almost 2%, about half of which came during yesterday’s U.S. hours (Nikkei futures are up about 1%). This strong 48-hour move comes as the Japanese yen has completely broken down through long-term technical support.
Investors were placed on an emotional rollercoaster ride this week as trade tensions between the United States and China intensified. The Trump Administration’s latest threats to impose tariffs on an additional $200 billion of Chinese goods initially dealt a blow to global sentiment, rekindled jitters and sparked risk aversion.
Global equity markets are back in the green this morning and cueing off a softer trade rhetoric from China. The market is focused on China’s response to the White House’s third wave of tariffs worth $200 billion and ultimately, as we pointed out here yesterday, China only imported $130 billion of U.S. goods in 2017.