Trade Concerns Resurface, Geopolitics Weigh On Stocks, Trump Pushes Forward With Tariff Plans
Asian Markets Are Mixed As Trade Concerns Resurface
Asian indices were mixed on Tuesday as trade concerns resurface. Ex-China was up an average 0.80% in the wake of the US rebound on Monday while Chinese and Hong Kong-based markets were more cautious. The Shang Hai closed with a loss near -0.04%, the Heng Seng near -0.17%, as new shots are fired in the trade war.
US President Donald Trump says he may put a 10% tax on Apple products coming out of China and that put pressure on the entire Apple supply chain. Shares of Taiwan Semiconductor and Pegatron were both able to recover their losses before the close of the session but others were not so fortunate. Catcher Technology fell nearly -2.25% while Foxconn, assembler of iPhones, shed -0.42%.
Geopolitics Weighs On European Markets
European markets were drifting lower at midday as trade concerns, Brexit uncertainty, and Italian budget issues weigh on sentiment. Losses were broad but small relative to market moves in recent weeks. The DAX was leading with a loss near -0.35% but the FTSE and CAC were close behind.
On the trade front, President Trump says the Brexit may affect the US ability to trade with the UK and does not appear to support the deal despite the EU’s affirmation over the weekend. Regarding Brexit, Prime Minister Theresa May still has many hurdles to overcome and faces a parliamentary vote on the deal in two weeks.
In Italy, lawmakers are sticking to their 2019 budget plans despite word on Monday they were cutting deficit targets in order to avoid sanctions from the EU. The news, amid other concerns, had the financial sector trading lower led by 3.0% losses in Metro bank and BBVA. In earnings news a profit warning from Thomas Cook. The iconic travel and leisure brand says profit will fall short of guidance and suspended its dividend causing stocks across the sector to fall.
Trump Moves Forward With Tariff Plans
In the US, markets were trading lower in early futures action as President Trump indicates he will move forward with plans to raise tariffs. Trump said in an interview with the Wall Street Journal that it was highly unlikely the US would delay raising tariffs to 25% despite the meeting scheduled for him and Chinese President Xi Jinping. The meeting is not expected to produce concrete changes in trade relations but it is expected to deliver positive developments, Trump’s comments have cast a shadow of doubt on the outcome now.
While traders are focused on the Trump/Xi meeting other events are likely to move the market as well. Tomorrow there is a speech from Federal Reserve Bank Chairman Jerome Powell that will be closely monitored for signs of Fed dovishness. On top of that, Thursday is the release of the PCE Price Index, the Fed’s favored tool for monitoring inflation, as well as the minutes from the last FOMC meeting. The SPX and Dow Jones Industrials were indicated to open with a loss near -0.42% while the Nasdaq was looking at losses near -0.60% on trouble in tech related to the Apple tariff threat.
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