TradeTheNews.com Weekly
Market Update: US-China Trade Differences Resurface
Fri, 10 May 2019 16:05 PM EST
Global markets were waylaid this week by resurgent worries surrounding trade
which coincided with renewed missile tests from North Korea. Both the S&P
and NASDAQ tested below their 50-day moving averages for the first time since
January, and the Russell 2000 briefly moved back into correction territory.
Before Monday’s opening bell, President Trump had already announced tariffs
would be raised to 25% by the end of the week while threatening to go even
further. Repeatedly the President openly displayed his displeasure by confirming
his belief China had backtracked on legal issues related to an already
agreed-upon text of a proposed U.S. trade agreement, affecting nearly every
chapter. Risk-off flows picked up in intensity as the week wore on. Treasury
yields fell on both sides of the Atlantic. US CPI figures seemed to offer
little to change the Fed’s narrative around inflation, as well. Wednesday’s
10-year Treasury auction saw some of the weakest demand in years, prompting
speculation China may have backed away to send a signal to Washington.
Friday’s trade saw a significant reversal from the week’s lows after US and
Chinese officials concluded two days of discussions in Washington. Despite the
implementation of intensified US tariffs and the looming threat of even more
down the pike, along with an open threat of retaliation by the Chinese, both
sides agreed talks had remained constructive and would push forward in the
future. The VIX popped to the highs of the year midweek, but moderated as
markets seemed to become accustomed to the salvos of trade barbs. Emerging
market currencies suffered and the Dollar gained significant ground against the
Yuan. Dr. Copper retraced to the lowest level since January, and WTI crude got
within a few pennies of $60 per barrel before rebounding after weekly crude
stockpiles shrank. For the week, the S&P fell 2.2%, the Dow lost 2.2% and
the NASDAQ shed 3%.
In corporate news this week, earnings season began to wind down, and Fox topped
estimates in its first quarterly report as a standalone company, bolstered by
strong growth in cable news revenue. Yelp shares slipped due to worries about
its growth with new customers, despite reporting in-line with consensus.
Marriott fell after posting a miss on top-line estimates and guiding Q2 profits
below consensus. Intel moved lower after warning in an investor presentation
that its move to a more competitive chip space could affect profit margins and
medium-term revenues going forward. Communications infrastructure firm Zayo
Group agreed to go private for $35/shr after months of reports of a potential
takeover. Chevron announced it would not raise its offer for Anadarko and
accepted the $1B breakup fee after Occidental finalized its $38B competing bid
to acquire the hydrocarbon E&P giant. Uber opened for trading below its IPO
price of $45 as investor appetite wobbled after a long journey going public.
SUNDAY 5/5
(CN) President Trump tweet indicates that tariffs on some China goods will go
from 10% to 25% starting Friday and some goods currently not taxed will be
taxed at 25%
BA Reportedly did not tell anyone about issue with cockpit safety alert in 737
Max for a year - US Press
MONDAY 5/6
(CN) China Vice Premier Liu He likely to delay trip to US by 3 days and shorten
trip to only 1 day for trade talks this week (in response to Trump's tweets on
raising tariffs) - SCMP
*(DE) GERMANY APR FINAL SERVICES PMI: 55.7 V 55.6E (confirms 70th month of
expansion)
KHC Discloses reached a determination to restate the Company’s consolidated
financial statements - filing
(TR) Turkey Election Board reportedly has nullified the mayoral vote in
Istanbul; AKP party rep says election will be re-run on June 23 - Turkish press
(US) Trade Rep Lighthizer: confirms US will raise China tariffs effective
12:01ET on Friday if no deal; confirms China was reneging on commitments -
comments to reporters
TUESDAY 5/7
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT
1.50%; NOT EXPECTED
ABI.BE Reports Q1 $0.79 v $0.90e, adj EBITDA $4.99B v $5.10Be, Rev $12.6B v
$12.8Be; confirms mulling sale Asia Pacific unit in Hong Kong IPO
*(US) MAR JOLTS JOB OPENINGS: 7.488M V 7.350ME
*(US) MAR CONSUMER CREDIT: $10.3B V $16BE
*(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE (OCR) BY 25BPS TO
1.50% (record low); AS EXPECTED (resumes its easing with its 1st since Nov
2016), adjusts rate path for another cut
*(CN) CHINA APR TRADE BALANCE (CNY): 93.6B V 216.8BE
WEDNESDAY 5/8
7203.JP Reports FY18/19 Net ¥1.88T v ¥2.49T y/y; Op ¥2.47T v ¥2.40T y/y; Rev
¥30.2T v ¥29.4T y/y; to buyback ¥300B in shares (1.73% of shares outstanding)
SIE.DE Reports Q2 Net €1.92B v €1.20Be, Industrial Business Profit €2.41B v
€2.20Be, Rev €20.9B v €21.0Be
(CN) China said to have backtracked on legal issues through text of proposed U.S.
trade agreement, affecting nearly every chapter - press
(CN) US govt issues formal notice that 25% tariffs on $200B worth of Chinese
goods will take effect Friday
(US) Association of American Railroads weekly rail traffic report for week
ending May 4th: 535K, -2% y/y (has fallen for 12 consecutive weeks)
INTC Guides 3-yr Rev growth in low-single digits to ~$76-78B - investor day
THURSDAY 5/9
DTE.DE Reports Q1 adj Net €1.18B v €1.30Be, adj EBITDA (adj for leases) €5.94B
v €6.0Be, Rev €19.5B v €19.3Be
MT.NL Reports Q1 Net $414M v $1.19B y/y, EBITDA $1.65B v $1.7Be, Rev $19.2B v
$18.4Be
(KR) North Korea said to fire an unidentified projectile - press
*(US) APR PPI FINAL DEMAND M/M: 0.2% V 0.3%E; Y/Y: 2.2% V 2.3%E
(US) Atlanta Fed cuts Q2 GDP forecast to 1.6% from 1.7% prior
*(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.0%;
AS EXPECTED
APC Agrees To Be Acquired By Occidental; implied value of the cash and stock
offer is ~$75.53/share (based on Occidental's closing price); Chevron to
receive the $1.0B breakup fee
FRI 5/10
*(CN) TRUMP IMPLEMENTATION OF TARIFFS ON $200B IN CHINA GOODS FROM 10% TO 25%
TAKES EFFECT
*(CN) CHINA ANNOUNCES TO RETALIATE TO US TARIFF INCREASE (awaiting specifics)
*(US) APR CPI M/M: 0.3% V 0.4%E; CPI EX-FOOD/ENERGY M/M: 0.1% V 0.2%E; CPI NSA:
255.548 V 255.800E
UBER IPO opens for trade at $42.00
(CN) China trade negotiator Liu: Trade talks with the US went fairly well
(US) President Trump tweet: "Over the course of the past two days, the United
States and China have held candid and constructive conversations on the status
of the trade relationship between both countries. The relationship between
President Xi and myself remains a very strong one, and conversations into the
future will continue. In the meantime, the United States has imposed Tariffs on
China, which may or may not be removed depending on what happens with respect
to future negotiations!"
