TradeTheNews.com Weekly
Market Update: Trade war tensions continue to stoke uncertainty
Fri, 24 May 2019 16:04 PM EST
Equity trade remained extremely sloppy this week as the growing tension between
the US and China hung over markets. Huawei remained ground zero for the trade
war as rhetoric around the controversial Chinese telecom name mushroomed. The
White House was said to be considering an expanded black list of Chinese
companies while reports circulated that China could retaliate against US tech
companies or use its rare earth monopoly as an asymmetrical pressure tactic. By
the week’s end, some analysts saw the seeds of a new Cold War splitting the
world between two economic and technological blocs.
Brexit uncertainly also continued to drag on sentiment as PM May made one final
gambit to gain support for her withdrawal bill. By Friday, the broad-based
rejection of her new Brexit offer to Parliament forced her to step aside and
begin the process for finding a new Conservative leader. Following the news
officials in Europe and potential PM candidates in London agreed that the UK
would still be leaving EU by the end of October, but chances of a ‘no deal’
Brexit rose at least modestly. That, along with more weak manufacturing and
business confidence data reignited uneasiness about the potential for recession
across Europe. Any hopes for firmer inflation were dampened by a technical sell
off in oil, as crude prices slid below the 200-day moving average to near
two-month lows. Persistent growth and trade worries kept pressure on US and
European bond yields, with some hitting their lowest levels since 2017. For the
week, the S&P lost 1.2%, the DJIA dropped 0.7%, and the Nasdaq gave up
2.3%.
In corporate news this week, Sprint and T-Mobile reached a deal with the FCC
for merger approval, but hurdles still remain from potential antitrust action
at the Justice Department or from state attorneys general. A federal judge
ruled against Qualcomm, finding the company’s patent licensing practices
violated antitrust law, sending shares down almost 15% on the week. Home Depot
slipped after announcing that weak lumber prices and bad weather weighed on its
Q1 results. Kohl’s missed expectations on earnings and its outlook, while JC
Penney’s same store sales fell 5.5%, well below consensus. Lowe’s shares
plummeted after it reported an EPS miss amid gross margin contraction, while
Target jumped after seeing strong SSS and traffic in Q1.
SUNDAY 5/19
05/19 *(JP) JAPAN Q1 PRELIMINARY GDP Q/Q: +0.5% V -0.1%E ANNUALIZED GDP Q/Q: +2.1%
V -0.2%E
MONDAY 5/20
LITE Cuts Q4 $0.65-0.77 v $0.91e (prior $0.85-1.00), Rev $375-390M v $416Me
(prior $405-425M); Provides update on U.S. Department of Commerce entity list
designation of Huawei; Discontinues all shipments to company
TUESDAY 5/21
HD Reports Q1 $2.27 v $2.17e, Rev $26.4B v $26.3Be
KSS Reports Q1 $0.61 v $0.67e, Rev $4.09B v $4.21Be
*(US) APR EXISTING HOME SALES: 5.19M V 5.35ME
(UK) PM May: I will offer vote to all on 2nd referendum assuming a Brexit deal
has been agreed to first (conditional on bill passing first stage)
(SY) State Dept spokesperson: seeing signs that Syria could be renewing its use
of chemical weapons; If Syrian govt uses chemical weapons, US and allies 'will
respond quickly and appropriately'
WEDNESDAY 5/22
(CN) US said to now consider blacklisting up to 5 surveillance companies in
China (follows report of possible blacklisting of Hikvision) - US financial
press
QCOM US Federal Judge Lucy Koh rules against Qualcomm in Federal Antitrust
Case, ordered to renegotiate licensing agreements - press
LOW Reports Q1 $1.22 v $1.33e, Rev $17.7B v $17.6Be
(US) Fed's Bullard (Dove, voter): would not rule out rate cut later this year -
speaks in Hong Kong on US Economic Outlook
(US) Pres Trump: I told Democrats I wanted to do infrastructure but can't do it
under these circumstances; there will be no infrastructure deal amid ongoing
'phony investigations'
*(US) FOMC MINUTES FROM MAY 1 MEETING: OFFICIALS SAW PATIENT APPROACH
APPROPRIATE FOR 'SOME TIME'; MANY POLICYMAKERS SAID RECENT DIP IN PCE INFLATION
LIKELY TO BE TRANSITORY
(US) Association of American Railroads weekly rail traffic report for week
ending May 18th: 536.4K, -1.8% y/y (has fallen for 14 consecutive weeks)
THURSDAY 5/23
992.HK Reports Q4 Net $118M v $33M y/y, Rev $11.7B v $10.6B y/y
*(DE) GERMANY Q1 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 0.7% V 0.7%E
(CN) China Commerce Ministry (MOFCOM) spokesperson Gao: US wrong practices
escalated trade tensions with China; If US wants to keep talks, they should
show sincerity
*(FR) FRANCE MAY PRELIMINARY PMI MANUFACTURING: 50.6 V 50.0E (3 month high)
(DE) GERMANY MAY PRELIMINARY PMI MANUFACTURING: 44.3 V 44.8E
*(EU) EURO ZONE MAY PRELIMINARY PMI MANUFACTURING: 47.7 V 48.1E
*(DE) GERMANY MAY IFO BUSINESS CLIMATE SURVEY: 97.9 V 99.1E; CURRENT ASSESSMENT
SURVEY: 100.6 V 103.5E
BBY Reports Q1 $1.02 v $0.88e, Rev $9.14B v $9.14Be
(ZA) SOUTH AFRICA CENTRAL BANK (SARB) LEAVES INTEREST RATE UNCHANGED AT 6.75%;
AS EXPECTED
*(US) MAY PRELIMINARY MARKIT MANUFACTURING PMI: 50.6 V 52.7E (lowest since Sept
2009)
*(US) APR NEW HOME SALES: 673K V 675KE
(CN) Pres Trump: there's a good possibility of a China trade deal; Huawei could
be included in a China trade deal
(US) US Commerce Dept: Proposing rule to impose countervailing duties on
countries that undervalue their currency relative to the US dollar
FRIDAY 5/24
(KR) North Korea said to take actions against U.S. distrust, hostility - Korean
press
*(UK) APR RETAIL SALES (EX-AUTO /FUEL) M/M: -0.2% V -0.5%E; YOY: 4.9% V 4.2%E
(UK) PM May: I have strived to honor results of EU referendum; has done her
best to deliver Brexit
*(UK) PM MAY ANNOUNCES TO STEP DOWN ON JUN 7TH
(CN) Premier Li Keqiang: China will expand tax cuts to stimulate economy; China
has space to use policy tools for macro adjustments
(US) Atlanta Fed raises Q2 GDP forecast to 1.3% from 1.2% prior
