Trade Talks Rattle Market, Reversal Is Imminent

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Trade Talks Rattle Market, Reversal Is Imminent

Trade Talks Stall, Tariffs To Rise

The U.S./China Trade Talks have stalled. President Trump, in an effort to spur progress, has announced the current 10% tariffs will be increased to 25% on Friday. In addition, he is targeting another $350 billion in Chinese goods and may levy those duties as early as this week. The move in in response to China’s attempt at renegotiating previously agreed-upon items within the deal-in-progress.

China, for its part, says it is surprise by the new threats. Vice Premier Liu He is scheduled to visit Washington this week in what was thought to be the final round of talks. Now, China is considering whether or not to pull out of the talks or continue under the new paradigm. Markets in Asia fell hardest on the news, the Shanghai Composite and Shenzen Composite shedding 5.0% and 7.0% respectively.

The U.S. market did not respond well either. The Dow Jones Industrial Average, NASDAQ Composite, and S&P 500 all fell nearly 2.0% in early premarket trading. The move put the broad market S&P 500 down to the short-term 30-day moving average where it faces a critical decision; bounce higher or break through and move lower. With trade talks in question and no reason now to think a deal is at hand a move lower seems like the most obvious move.

Aiding this move will be poor outlook for future earnings. Earnings growth is expected to resume a positive trajectory later this year but growth will be small. Possibly non-existent if trade talks do indeed fall apart. For now, support appears to be present at 2,900 although you should expect at least a test of support in the near-term. The indicators are both moving lower after diverging from recent highs, an indication of market weakness and potential for price reversal.

A break below the 30-day EMA will likely go to 2,800 in the near-term, if not lower. Longer-term, it is possible we’ll see the index form a much deeper correction, a correction within an even longer-term secular market consolidation, and one that could take the index down to retest lows set last December. The risk is that trade talks will resume, that this latest development is nothing more than a speed bump, and that scenario may result in a surge to new highs.

Wall Street joins global sell-off as tech Cold War and US slowdown spook investors

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  • Stocks sink amid growing fears of tech Cold War
  • Beijing warns US must change course for trade talks
  • US PMI drops to three-year low as trade worries mount
  • No European election ever deflects the EU one inch from its rigid course
  • Ben Marlow: We are nearing the end of steel-making in the UK
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Markets wrap: Fears of tech Cold war send stocks sliding amid signs of slowdown in US economy

M ounting fears of a tech Cold War breaking out between the US and China have triggered a sharp slide in global stocks as trade tensions continued to escalate.

Beijing warned that trade talks will only continue if the Trump administration softens its stance as China’s Ministry of Commerce urged the US to “adjust its wrong actions”. British chipmaker ARM and Panasonic became the latest companies to cut off ties with Huawei, fueling concerns of the widening impact of Donald Trump’s clampdown on the Chinese mobile phone giant.

The FTSE 100 slumped 1.4pc, led lower by its tumbling oil stocks as crude prices suffered their worst day in 2020. Tech stocks led the sell-off in the US as the benchmark S&P 500 index plunged as much as 1.6pc in afternoon trade.

The pressure on markets was increased by signs of the global slowdown spreading to the US. IHS Markit’s closely-watched purchasing managers’ index sank to a three-year low as businesses blamed trade war worries for the recent deceleration.

Thomas Cook gets private equity bid for Scandinavian division

T homas Cook has had an unsolicited offer from a European private equity giant for its Scandinavian business, providing a much-needed boost to its parlous financial situation.

Triton, a German-Swedish fund manager that recently bought continental travel agent Sunweb, made a “highly speculative” bid for its Northern Europe division, comprising its tour operator and airline in Norway, Sweden, Finland and Denmark. Its market-leading Nordic brands include Ving, Tjareborg and Spies.

US economy slows to three-year low, survey indicates

���� Flash US PMI tumbles to 3-yr low of 50.9 (53.0 – April), on the back of marked slowdowns in both manufacturing and services. #PMI consistent with annualised growth of approx. 1.2% in May. Business confidence slumped to lowest since ’12. Read more: https://t.co/cVdRBx45Tb pic.twitter.com/a7D6DNoszE

S ome concerning economics data from the US could pile more pressure on markets this afternoon.

The US economy slipped sharply towards stagnation territory in May as growth slowed to its lowest level in three years, according to a closely-watched gauge.

IHS Markit’s purchasing managers’ index dropped to 50.9 from 53 (any reading above 50 indicates growth) as trade war worries and uncertainty mounts.

IHS Markit economist Chris Williamson warned that “worse may be to come, as inflows of new business showed the smallest rise seen this side of the global financial crisis”.

‘China could use rare earth metal exports to hit back at US’

After President Xi inspected a rare earth enterprise, halting rare earth exports to the US as a weapon has been discussed more among the Chinese. I think Chinese government won’t do this immediately, but it’s seriously evaluating the need to do so.

I NG warns that China could retaliate in a tech war with the US “in ways that could prove very damaging”.

Its economist Iris Pang believes that Beijing could respond by banning rare earth metal exports to the US, instantly wiping out 80pc of supply to the States. Chinese president Xi Jinping stoked speculation over a retaliation using the exports after he visited a rare earths facility earlier this week.

Ms Pang explained that rare earth metals are used in ” electronic goods and parts and a ban would slow down US manufacturing activities, which the current US administration wants to promote”.

“An export ban could be temporary in order to give the US the option to return to the negotiating table.”

US stocks join global slump

U S stocks have slumped deep into the red in early trade across the Atlantic as the war of words between the Trump administration and Beijing continues to escalate.

The Dow Jones has tumbled 1.5pc as tech stocks suffer the heaviest damage in the latest rout on Wall Street.

There is little sign of a reversal of fortunes in Europe after the sliding start to trading in the US. The Euro Stoxx 50 is languishing close to its intraday lows on a 1.7pc loss.

Price of generic drug soared 700pc due to collusion, watchdog finds

T he competition watchdog has accused four pharmaceutical companies of breaking competition law by conspiring to keep the price of an important NHS drug artificially high.

The Competition and Markets Authority (CMA) claims that Alliance, Focus, Lexon and Medreich agreed not to compete with each other over the supply of anti-nausea and dizziness drug prochlorperazine to the NHS between June 2020 and July 2020.

As a result, the CMA alleges that the price of the generic drug rose by 700pc, from £6.49 for a pack of 50 tablets to £51.68.

U S Secretary of State Mike Pompeo has insisted that mobile phone giant Huawei works with the Chinese government, calling its recent denials “false”.

Mr Pompeo told CNBC that “the Huawei CEO on that, at least, isn’t telling the American people the truth”.

“If you’re a state-directed business and you take on subsidies direct from the Chinese government, there’s no doubt you can make real hay,” he said.

Its founder Ren Zhengfei said earlier this week that the US “underestimates” Huawei after blacklisting the tech giant in an attempt to stop American companies doing business with the phone maker.

Mr Pompeo expects more US companies to cut ties with Huawei, he told CNBC.

‘Brace for long hostile tech war’

���� ���� Some U.S. politicians are making moves to start a “#technology cold war,” with the goal of curbing the development of other countries and establishing U.S. #tech hegemony – People’s Daily
*Link: https://t.co/ckkR0OyF47

T he stocks slump is expected to spread to Wall Street this afternoon after the latest spike in trade tensions between the US and China.

Stock futures indicate that the benchmark S&P 500 will sink 0.9pc when markets open in New York this afternoon, taking its cue from the weak trading in Europe and Asia.

Seema Shah at Principal Global Investors believes that the market’s reaction to the latest developments “has been surprisingly subdued”.

She warned investors to “prepare for a longer, more hostile, technology war–with some meaningful collateral damage”.

The tech cold war: Inside the US battle against Chinese technology

Y esterday aluminium and steel. Today microchips and apps. Tomorrow, two superpower visions for the world, and a choice for the rest of us?

The showdown between China and America has shown its true colours. What began as a spat over tariffs is now a rolling maul in which it is hard to disentangle technology from diplomacy; supply chain from sphere of influence; espionage from innovation. The brand symbolism of Google vs Huawei is becoming geopolitical substance.

Fittingly so. For Huawei’s story mirrors China’s own; its dependence on Google’s expertise reflects China’s own dependence on American invention during its rapid modernisation. And now that apparent lifeline is being cut off, Huawei’s response is telling: “We’ve been planning for this.”

FTSE 100 slumps as trade war worries rattle stock markets

T he rout on European markets is deepening this morning as trade war worries rattle stocks.

The FTSE 100 has slumped 1.4pc as companies continue to cut off Chinese phone giant Huawei and the US considers widening its tech clampdown. The Euro Stoxx 50, which tracks eurozone stocks, has plunged 1.6pc

Beijing has warned that trade talks with the US will only continue if the Trump administration changes its hardline approach.

Ministry of Commerce spokesperson Gao Feng said: “If the US would like to keep on negotiating it should, with sincerity, adjust its wrong actions. Only then can talks continue.”

Amazon working on wearable device to detect human emotions, says report

*AMAZON IS WORKING ON A WEARABLE DEVICE THAT READS HUMAN EMOTION

Cool cool cool cool cool this is fine yeah this is totally fine

A mazon is reportedly working on a wearable device that will be able to detect human emotions.

Bloomberg has revealed that the device has microphones that will use the sound of a wearer’s voice to identify their emotional state with the product designed to work with a smartphone app.

The report said the product could be used to advise a person on how to interact better with others.

Sterling trims losses versus euro after disappointing eurozone indicators

S terling has trimmed its losses against the euro after a disappointing batch of PMIs suggested that the eurozone’s economy is slowing again.

Capital Economics economist Christina Iacovides calculated that the business survey data indicates that the eurozone’s growth has slowed to 0.2pc in the second quarter as its manufacturing sector struggles to recover.

She added that the surprise drop in the IFO Business Climate Index this morning suggests that the German economy has “slowed to little more than a crawl”. Sterling has now recovered back to flat territory against the euro at €1.1356.

Legoland owner Merlin told to go private by activist investor

T he owner of attractions including Alton Towers, Legoland and Madame Tussauds has rejected a call by an activist investor to take the company private to improve its financial performance.

Merlin Entertainments said it “maintains an active dialogue with all its shareholders”, including ValueAct Capital, which issued an open letter to chairman Sir John Sunderland urging it to pursue a take-private deal.

The board believed it was “in the best interests of all its shareholders to continue to pursue its current strategy”, the company said.

Stocks sink as trade war worries mount

S tocks across Europe have tumbled this morning as fears of a tech Cold War between the US and China mount on markets.

The FTSE 100 has slumped 1.1pc after British chipmaker ARM and Panasonic became the latest companies to cut off ties with Chinese phone giant Huawei following the Trump administration’s blacklisting.

The Euro Stoxx 50 has fallen 1.5pc to near an eight-week low while US stock futures point to a sharp slide on Wall Street this afternoon.

German factories struggle in contraction territory as confidence hits five-year low

Weak set of data points from the eurozone, with Manufacturing PMI falling to 47.7 (from 47.9), Services PMI down to 52.5 (from 52.8), and German Ifo Business Climate at a 9-yr low of 97.9 (from 99.2)

G ermany’s ailing manufacturing sector languished in contraction territory for a fifth straight month in May as its industrial slump continues.

IHS Markit’s manufacturing PMI edged lower to 44.3 from 44.4, slipping back towards March’s seven-month low. Any reading above 50 indicates growth.

Economist Phil Smith said that fears of a slowdown are starting to spread into the services sector from manufacturing with confidence now at its joint-lowest since 2020.

‘Currency traders will start to price in no deal risk’

In the midst of chaos, there is also opportunity. Very much applicable to $GBP markets right now. Pound trading with large degree of political risk premium. $GBP typically bounces back once eye of the Westminster storm passes (eg, Jun 2020 elections and Dec 2020 No Deal risks) pic.twitter.com/ur1XDNz4PM

T he pound is lit up in a deep red on traders’ computer screens in the City for a second straight day as the political crisis in Westminster deepens. It has tumbled against all of its major rivals and is comfortably the worst-performing G10 currency in May.

Sterling “still remains fragile” after its recent slide and currency traders will start pricing in the risk of a no deal Brexit, warned ING head of foreign exchange strategy Chris Turner. He explained:

“It looks like PM May will be resigning sometime over the next week now that she has lost the support of some of her key cabinet members. What comes next is wholly uncertain, but most likely market pricing of a no deal Brexit will increase this summer.”

No European election ever deflects the EU deep state one inch from its rigid course

T he election of 170 part-time dilettantes from the Eurosceptic Left and Right might shake up French or Italian politics. It will change absolutely nothing in the governing structure of the EU.

Trumpian ideologue Steve Bannon deems the European Parliament vote this week to be “one of the most important elections ever” but he has never tangled in earnest with Germano-European deep state. The EU’s permanent machinery will reassert iron control once the noise has subsided.

Agenda: Pound nears 2020 low as investors brace for PM’s departure

T he pound is nearing a 2020 low against the dollar as investors brace for the imminent departure of Theresa May and a Conservative leadership contest.

Sterling extended its sharp slide on currency markets after reports suggested that the prime minister could step down as soon as Friday following a fierce backlash to her new Brexit proposal. It dropped to a four-month low against the dollar yesterday after Mrs May’s offer of a vote on a second referendum fell flat with MPs.

As the pressure mounts on the prime minister, the pound slipped a further 0.8pc against the dollar at $1.2571, its lowest level since a flash crash hit foreign exchange markets in early January.

It has now lost more than 4pc of its value against the dollar in just over three weeks amid fears that a Brexiteer prime minister increases the risk of a disorderly departure from the EU or a general election.

Full-year results: Mediclinic, NewRiver REIT, QinetiQ, TalkTalk, Tate & Lyle, United Utilities

Interim results: AJ Bell, Mitchells & Butlers

Trading statement: Coats, Essentra, Ibstock, Intertek, Sabre

Economics: Composite PMI (US & EZ), New home sales (US)

Global stocks in Risk-Off mode w/ Asia shares at 4mth low as trade war worries. China calls US a threat to the world. Yen and bonds buoyed by safe-haven bid w/ US 10y yields at 2.39%. Pound plunges to $1.2638 on #Brexit chaos and on reports PM May to quit. #Bitcoin at $7.6k. pic.twitter.com/XYUQusCq4i

— Holger Zschaepitz (@Schuldensuehner) May 23, 2020

Tech stocks buoy Wall Street as China-U.S. trade talk progress

(Reuters) – U.S. stocks rose for the second straight day on Tuesday, led by technology companies on signs that China and the United States were moving toward resolving their bitter trade dispute that has roiled global equities markets for months.

After a strong start, which was also boosted by healthy economic data, the three indexes pared gains to about 0.5 percent, helping the S&P 500 and Dow Jones Industrial Average cut some of their losses for the year.

U.S. and Chinese officials discussed a road map for the next stage of trade talks, while President Donald Trump said negotiations were “very productive” and an “important announcement” was imminent.

Adding to the optimism was a Bloomberg report that China is moving to cut import tariffs on U.S.-made cars to 15 percent from 40 percent, which lifted shares of General Motors Co and Ford Motor Co.

“The trade headlines help, but there is something being said for a new market structure where a lot of money is managed passively by algorithms driven accounts,” said Yousef Abbasi, global market strategist at INTL FCStone in New York.

“Some of the volatility we have seen has made me question what stocks are moving on. When you see this amount of volatility, fundamentals go out the window. We will see some degree of selling into the strength.”

The S&P snapped a three-day losing streak Monday as the index bounced off an eight-month low, which some strategists said was due to trading algorithms appearing to kick in with buy signals at the lows.

Technology stocks, which helped power the market’s reversal Monday, rose 0.65 percent and continued to provide the biggest support.

The trade-sensitive chipmakers index jumped 1.61 percent, while industrials rose about 0.13 percent.

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Pfizer Inc was down 1.67 percent after a JP Morgan downgrade. Apple Inc was off 0.28 percent, while Boeing Co reversed course to drop 0.8 percent. The three stocks curtailed gains on the indexes.

At 11:32 a.m. ET, the Dow was up 48.68 points, or 0.20 percent, at 24,471.94. The S&P 500 was up 11.89 points, or 0.45 percent, at 2,649.61 and the Nasdaq was up 50.42 points, or 0.72 percent, at 7,070.94.

The biggest gainer was the materials sector’s 0.97-percent rise, while the defensive utilities sector was flat.

Alphabet Inc was up 0.43 percent as Google Chief Executive Officer Sundar Pichai started a congressional hearing saying the company currently has “no plans” to launch a search engine in China.

Data showed U.S. producer prices unexpectedly rose in November, but the overall momentum in wholesale inflation appears to be slowing.

The report comes as investors also grapple with concerns over interest rates and is ahead of the more crucial consumer price data on Wednesday.

Advancing issues outnumbered decliners by a 2.56-to-1 ratio on the NYSE and a 1.85-to-1 ratio on the Nasdaq.

The S&P index recorded nine new 52-week highs and one new lows, while the Nasdaq recorded 21 new highs and 92 new lows.

(Reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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