Thursday May 23rd

23-05-2019

Dow futures drop 250 points, continuing this month’s slide on trade-war fears

U.S. stock index futures were sharply lower Thursday as U.S.-China trade worries persisted with more companies suspending business with Chinese telecom giant Huawei. Dow Jones Industrial Average futures dropped 253 points, indicating a loss of 251 points at the open. S&P 500 futures fell 26 points while Nasdaq 100 futures declined 89 points. “The trade landscape looks bleaker than ever,” said Adam Crisafulli, executive director at J.P. Morgan, in a note. “Anyone bullish on the SPX has to be conducting a lot of soul searching at the moment.” Crisafulli also pointed out that flash PMIs indicate that an economic rebound from earlier this year is “showing signs of attenuating” while the Federal Reserve is in no hurry to cut rates. U.K.-based chip designer Arm Holdings said it suspended business with Huawei to comply with the U.S. blacklisting of the telecom company. Panasonic also said it stopped shipping some smartphone components to Huawei. Vodafone and BT Group, the biggest phone carriers in the U.K., said they are removing Huawei phones from their 5G network plans. At the same time, China is taking a stronger tone in its rhetoric towards the U.S. Ministry of Commerce spokesperson Gao Feng said:  “If the U.S. would like to keep on negotiating it should, with sincerity, adjust its wrong actions. Only then can talks continue.” “The U.S. ... crackdown on Chinese companies not only seriously damages the normal commercial cooperation between both countries, but it also forms a great threat to the security of the global industrial and supply chain,” Feng added. Shares of Qualcomm fell 2.9% while Xilinx declined 1.9%. Micron and Lam Research declined 2.2% and 1.8%, respectively. Apple shares also fell 1.7% after a UBS analyst cut his price target on the iPhone maker to $225 per share from $235. The analyst kept his buy rating on the stock, but noted that “a slightly lower multiple is prudent given soft smartphone market and ongoing US/China trade issues.” The U.S. and China have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment. Tensions ratcheted up earlier this month with both sides hiking tariffs on their goods. This has led the S&P 500 to fall 3% for the month through Wednesday’s close. Asia markets declined on Thursday as investors worried about the ongoing trade tensions between the United States and China. Mainland Chinese shares slipped on the day, as the Shanghai compositedeclined 1.36% to about 2,852.52 and the Shenzhen component fell 2.56% to 8,809.53. The Shenzhen composite also dropped 2.432% to approximately 1,503.37. Hong Kong’s Hang Seng index declined 1.73%, as of its final hour of trading. Elsewhere, the Nikkei 225 in Japan slipped 0.62% to close at 21,151.14. The Topix index also shed 0.36% to finish the trading day at 1,540.58. In South Korea, the Kospi fell 0.26% to close at 2,059.59. Oil prices dropped on Thursday, extending falls from the previous session amid surging U.S. crude inventories as low refinery runs and ongoing trade tensions weighed on the demand outlook. World shares made it four days in the red in the last five as concerns grew the China-U.S. trade conflict was fast turning into a technology cold war between the world’s two largest economies. Brent crude futures, the international benchmark for oil prices, were at $69.77 per barrel at 1016 GMT, down $1.22 from their last close. U.S. West Texas Intermediate (WTI) crude futures were down by $1.09 cents at $60.33 per barrel, after falling 2.5% the previous day. Gold prices held firm on Thursday, as simmering Sino-U.S. trade tensions underpinned the dollar, while bullion investors looked for a direction after the minutes of the U.S. Federal Reserve meeting indicated that rates will remain unchanged. Spot gold was mostly flat at $1,274.03 per ounce as of 0725 GMT, after falling to $1,268.97 on Tuesday — its lowest level since May 3. U.S. gold futures were unchanged at $1,274.20.