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On 20 May 2019 - Global technologies sell-off; US readies new round of China tariffs

Anne D Picker

Anne D Picker - Econoday

Huawei blacklisting sends chip stocks lower.

US markets

Escalating trade tensions between the US and China centered now in telecom equipment maker Huawei pulled technology shares lower reflected in the Nasdaq which fell 1.5 percent. The S&P fell 0.7 percent while losses in the Dow industrials were more limited, at 0.3 percent.

Immediate tensions are focused on telecom maker Huawei which the US has blacklisted as a security threat. Trade friction may begin to intensify yet further as the US formally begins the process to impose 25 percent tariffs against an additional $300 billion of Chinese imports. The review points to new sanctions being put in place as early as late June or early July.

Ford fell slightly on news it plans to cut 7,000 global salaried jobs and reduce its workforce by 10 percent. Shares of Sprint and T-Mobile surged on news regulators plan to back their merger.

The day's economic news was weak as April's drop in industrial production pulled down the national activity index to unexpectedly deep contraction of minus 0.45 with the 3-month average at minus 0.22. These are the weakest showings in three years. Personal consumption & housing, reflecting April contraction in retail sales, also pulled the index lower.

These data reflect observations at 4:00 PM US ET. Dated Brent spot crude was down US$0.18 to $72.03 while gold was US$0.10 higher at $1,277.50. The US dollar fell against the Australian dollar, the Swiss franc, the yuan, the euro, and the Canadian dollar; it was little changed against the yen and the pound. The yield on the US Treasury 30-year bond was unchanged at 2.83 percent while the yield on the 10-year note was up 3 basis points to 2.42 percent.

European markets

Fall-out from the US blacklisting of Huawei sent chipmakers lower and made for sharp declines across European markets. The DAX lost 1.6 percent while the CAC fell 1.5 percent and the FTSE 0.5 percent. Italy's MIB fell 2.7 percent pressured by losses in bank group Intesa Sanpaolo which traded ex-dividend in the session.

The US action against Huawei has led both Google and chip-maker Xilinx to suspend or limit their business with Huawei. A report that Infineon had stopped shipments to Huawei sent shares of the German chipmaker sharply lower. French-Italian chipmaker STMicroelectronics fell very sharply as did Austrian chipmaker AMS.

UK carrier Ryanair fell sharply on disappointing quarterly earnings that it blamed in part on delivery delays of the grounded Boeing 737 MAX which have been pushed into early next year.

In economic news, German producer prices in April showed significant pressure as did last week's German consumer prices in April. Producer prices jumped a larger than expected 0.5 percent on the month in their first increase since January and equaling the sharpest rise since January 2017. April's monthly bounce was broad-based and led by non-durable consumer goods which spiked 1.1 percent. Energy, up 1.0 percent, was also strong and excluding this category, prices climbed a more modest 0.3 percent.

Asia Pacific Markets

Asian equities were mixed Monday with Chinese markets off on more negative rhetoric in the US-China trade dispute, and on bearish Huawei news. Japan gained on a positive GDP surprise while Australian stocks rallied on business-friendly election results. In India, the Sensex jumped 3.7 percent on exit polls pointing to the re-election of Prime Minister Narendra Modi's ruling Bharatiya Janata Party.

In China, a government-linked publication said the country could walk away from bilateral trade talks unless the US adopts a more conciliatory stance. President Trump said in an interview that US tariffs were prompting manufacturers to move production out of China to other Asian countries. Reports that Google was cutting back its business with Huawei spurred selling in the telecom equipment maker and its suppliers.

The Shanghai composite fell 0.4 percent while Hong Kong's Hang Seng was off 0.6 percent. The Korean KOSPI posted a fractional loss despite gains for Korean automakers on reports suggesting progress on US-Korea trade. The Nikkei 225 edged up 0.2 percent. Australia's All Ordinaries rose 1.6 percent as conservatives returned to power in elections, a positive surprise for markets. Financials led the gains with Commonwealth Bank of Australia and Westpac up more than 6 percent.

Japan's economy recorded better-than-expected headline GDP growth in the three months to March, though this was largely due to the impact of a sharp fall in imports, with growth in domestic demand weakening. GDP grew 0.5 percent on the quarter, up slightly from 0.4 percent growth in the prior quarter and well above expectations for a 0.1 percent fall. This put first-quarter annualized growth at 2.1, up from 1.6 percent previously and stronger than the consensus forecast for a decline of 0.2 percent.

Looking forward

Minutes from the Reserve Bank of Australia will be released in Asia with European data to include the CBI Industrial Trends survey out of the UK and the EC consumer confidence flash for the Eurozone. Existing home sales will be posted in the US.

Global Stock Markets

 

Index

20 May 2019

Daily Change

% Change Daily

North America

 

 

 

 

United States

Dow

25679.9

-84.10

-0.3

 

NASDAQ

7702.38

-113.90

-1.5

 

S&P 500

2840.23

-19.30

-0.7

Canada

S&P/TSX Comp

*

*

*

Europe

 

 

 

 

UK

FTSE 100

7310.88

-37.74

-0.5

France

CAC

5358.59

-79.64

-1.5

Germany

XETRA DAX

12041.29

-197.65

-1.6

Italy

MIB

20539.87

-565.41

-2.7

Spain

Ibex 35

9199.7

-80.40

-0.9

Sweden

OMX Stockholm 30

1588.9

-17.96

-1.1

Switzerland

SMI

9582.08

-77.00

-0.8

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6564.74

104.53

1.6

Japan

Nikkei 225

21301.73

51.64

0.2

 

Topix

1554.92

0.67

0.0

Hong Kong

Hang Seng

27787.61

-158.85

-0.6

S. Korea

Kospi

2055.71

-0.09

0.0

Singapore

STI

*

*

*

China

Shanghai Comp

2870.6

-11.70

-0.4

Taiwan

TAIEX

10398.41

14.30

0.1

India

Sensex 30

39352.67

1421.90

3.7

*Markets closed

 

 

 

Data Source — Haver Analytics

 

 

 

Note: all releases are listed in local time.

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