And things were going so well. After four days of straight increases in US stock markets, mainly prompted by the looming earnings season which is expected to show a very respectable growth of about 20% this quarter for the S&P 500, stock markets in Asia, Europe, the US and most of the major commodities were plunged into red this morning, courtesy of the latest US trade tariff decision.
Attempt to negotiate trade solution yields no agreement
Fresh from starting to impose tariffs on $34 billion worth of Chinese goods since this Friday, and China responding in kind, the two countries attempted to negotiate a solution but failed. The attempt instead resulted in Washington proposing fresh tariffs on another $200 billion of Chinese imports and China saying it had no choice but to “fight fire with fire”.
The stock markets’ reaction was immediate: the FTSE and the DAX opened lower and then continued decline 1.19% and 1.25%, respectively. DJIA, Nasdaq and S&P futures also dropped, as did Chinese stock indexes.
In commodities the board was also almost uniformly red with declines in Brent Crude, gas, precious metals and wheat prices. Worse hit was copper, trading down 3.2% on the day. With China being the single biggest global buyer of base metals, frequently accounting for about half of global trade in the likes of copper, aluminium, nickel and zinc, investors were spooked by the intensifying trade tit-for-tat. Not only will this be negative for China’s demand for metals but will also affect FTSE heavyweights such as Rio Tinto (LON:RIO), Glencore (LON:GLEN) and BHP Billiton (LON:BLT) and a whole host of medium sized and smaller metals producers.
Hopes pinned on US earnings
Some counterbalance may be provided by US earnings which are expected to show strong growth across industries with the S&P 500 earnings delivering a 20% year-on-year increase, slightly less than the 24.8% in the previous quarter, and the second highest in eight years. The first to report are the four largest US banks this Friday.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Add a Comment
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.