Tuesday May 14th

14-05-2019

Stock futures point to gain at the open following Monday’s market rout

U.S. stock futures rose Tuesday as investors weighed the impact of the escalating trade war between the United States and China. As of 8:44 a.m. ET, Dow Jones Industrial Average futures indicated a gain of more than 75 points at the open. S&P 500 and Nasdaq 100 futures also pointed to early gains. Major U.S. indexes tumbled Monday after news that China plans to raise tariffs on $60 billion worth of U.S. imports, beginning on June 1. The list of targeted goods ranges from TV cameras to tequila, and includes a range of agricultural products. Beijing’s move comes after Washington announced last week it would increase tariffs from 10% to 25% on a bulk of Chinese imports. The Dow and S&P 500 suffered their worst days since early January, and the Nasdaq Composite had its biggest single-day loss of the year. In a note to clients Monday, Citi said its China economists are “cautiously optimistic that a trade deal can eventually be signed.” But added that the “window to avoid further escalations in US/China tensions is closing fast.” “Ongoing trade flare-ups may continue to swing the stocks in the near-term, but we think the market may have priced a lot of this in,” Citi said. President Donald Trump tweeted on Monday that China will be “hurt very badly if you don’t make a trade deal. ” He also said companies would be forced to leave the country without an agreement, adding that China had a “great deal” almost completed but they “backed out.” Stocks came off their lows in afternoon trading Monday after Trump said he had not decided if he would slap tariffs on the remainder of Chinese goods. Trump also tweeted on Tuesday the U.S. is in a “much better position now than any deal we could have made,” noting that “billions of dollars” are returning to the U.S. According to the Washington Post, the office of the U.S. Trade Representative has already gone ahead with first steps on slapping tariffs on roughly $300 billion of Chinese imports. Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, told clients in a note Monday that higher U.S. tariffs on Chinese goods will likely turn into a a headwind for corporate earnings — and the economy could fall into a recession if the country’s trade war keeps escalating. In the near-term, J.P. Morgan is preparing clients for the worst. The two sides have made progress and held a number of “constructive conversations” on structural issues and trade imbalances. “However, the remaining hurdles are critical and difficult,” J.P Morgan said. “With the re-escalation of tariff war risks (and China vowed to retaliate), it is challenging to reach an agreement very soon.” Stocks doing business in China got hit the hardest. Apple, Intel and Caterpillarhave all stumbled more than 10% in the six trading days since Trump’s surprise tweet announcing the higher levies. Coca-Cola shares rose more than 0.7% in the premarket after Morgan Stanley upgraded it to overweight from equal weight. The bank named the soda maker its “top mega-cap staples pick. ” Shares in Asia were lower on Tuesday, a day after Beijing raised tariffs on some American goods in retaliation for Washington’s decision last week to increase duties on Chinese products. Mainland Chinese shares slipped on the day, with the Shanghai compositelower by 0.69% to about 2,883.61 and the Shenzhen component down 0.71% to 9,038.36. The Shenzhen composite declined 0.624% to approximately 1,542.07. Hong Kong’s Hang Seng index fell around 1.7%, as of its final hour of trading. The Nikkei 225 in Japan fell 0.59% to close at 21,067.23. The Topix index also slipped 0.4% to finish its trading day at 1,534.98. In South Korea, the Kospi bucked the overall trend as it rose 0.14% to close at 2,081.84. Oil prices rose sharply Tuesday morning on reports of a drone attack at oil pumping stations in Saudi Arabia. The incident is an “act of terrorism,” Saudi Energy Minister Khalid al-Falih said according to the state new agency SPA, describing attacks on two oil pumping stations near Riyadh for the country’s East-West pipeline carried out with bomb-laden drones. Brent crude futures were up 1.3% at $71.14 a barrel, up 90 cents. U.S. West Texas Intermediate (WTI) crude futures were at $61.67 per barrel at 12:40 p.m. London time, up 1.03% for the session. Gold prices held near one-month highs on Tuesday as an escalation in the Sino-U.S. trade dispute sent investors looking for safe-haven assets. Spot gold was trading steady at $1,298, as of 0737 GMT, after hitting $1,303.26, its highest since April 11. U.S. gold futures were down 0.2% at $1,299.40.