U.S. stocks fell on Friday after China threatened to impose additional tariffs on $75 billion worth of U.S. goods, ahead of a highly anticipated speech from Federal Reserve Chair Jerome Powell.
China's latest tariffs, which follow U.S. duties on $300 billion worth of Chinese goods, threaten to prolong an ongoing trade war between the world's top two economies that have raised concerns about slowing global growth.
China's commerce ministry said it would impose additional tariffs on thousands of U.S. products, including agricultural products, crude oil, small aircraft and cars. Tariffs on some products would take effect on September 1 and others on December 15
U.S. Treasury bond yields slid following the development, while interest-sensitive banks <.SPXBK> fell 0.55%. Tariff-sensitive technology stocks dropped 0.54%, pressured by a fall in chipmakers and Apple Inc. The Philadelphia chip index slid 1.62%.
"Of course China is going to retaliate. That is part of the trade war," said Scott Brown, chief economist at Raymond James, in St. Petersburg, Florida.
"Trade issues are going to be important heading into the Powell speech, and he has to give some indication on how the global environment is influencing the Fed."
China unveiled on Friday retaliatory tariffs against about $75 billion worth of U.S. goods, putting an additional 10% on top of existing rates in the latest tit-for-tat exchange in a protracted dispute between the world's top two economies.
The latest salvo from China comes after the United States unveiled tariffs on an additional $300 billion worth of Chinese goods, including consumer electronics, scheduled to go into effect in two stages on September 1 and December 15.
China's commerce ministry said in a statement it would impose additional tariffs of 5% or 10% on a total of 5,078 products originating from the United States including agricultural products such as soybeans, crude oil and small aircraft. China is also reinstituting tariffs on cars and auto parts originating from the United States.
"China's decision to implement additional tariffs was forced by the U.S.'s unilateralism and protectionism," the Chinese ministry said in a statement, adding that its retaliatory tariffs would also take effect in two stages on September 1 and December 15.
U.S. equity index futures fell on the news of China's tariffs, pointing to opening losses on Wall Street.
White House trade adviser Peter Navarro told Fox Business News separately that trade negotiations with China would still go on behind closed doors.
U.S. electric vehicle maker Tesla Inc is in advanced talks with South Korea's LG Chem Ltd to source batteries for vehicles to be made in its Shanghai plant, a person familiar with the matter said.
The move represents a push by Tesla to diversify sources of the key component for its electric vehicles from its exclusive supplier, Japan's Panasonic Corp.
Another source said LG Chem agreed to supply batteries for Tesla's China plant, without elaborating.
LG Chem is expanding its China battery capacities and modifying some manufacturing facilities in Nanjing to make a different type of auto battery, according to the first source.
The company currently mainly makes pouch-type auto batteries, but as a major battery maker, it is not hard for it to revamp facilities to make cylindrical auto batteries that Tesla uses, the source and separate people familiar with the matter added.
The source said Tesla is still likely to use Panasonic batteries in the initial phase of production and source from other suppliers, including local names in the future.
A third person said Tesla might source batteries from CATL later, as the Chinese battery maker does not have much experience in making cylindrical batteries used by Tesla.
Another U.K. company has been snapped up by an overseas buyer. Last week it was pub chain, Greene King, bought by Hong Kong tycoon Li Ka-Shing for $5.5 billion including debt. This week, 'it's Entertainment One, the studio that owns the rights to 'children's TV character Peppa Pig.
Hasbro has offered to pay $4 billion for eOne, a 28% premium to 'Thursday's close in London, and 20% above the 'shares' all-time high in May. The shares have risen by even more – just over 30% - in early trading on Friday, suggesting that some feel a competing bid could be around the corner.
In contrast to Greene King, Entertainment One has always traded like a growth stock with global ambitions, even if its most recent annual results were overshadowed by problems transitioning from the DVD age to the streaming one. Peppa Pig has proven particularly popular in China, where two themed attractions are set to open by year-end.
Other franchises such as PJ Masks are also globally marketable and should be able to command solid licensing fees in a world where streaming giants with deep pockets such as Netflix, Walt Disney and Apple are throwing ever-higher sums at original content.
Oil prices pared gains slightly after weekly data on crude inventories, despite a bigger-than-expected drawdown.
According to the Energy Information Administration, U.S. crude oil inventories decreased by 2.7 million barrels, more than the estimated 1.89 million.
“The draw of nearly 3 million barrels at this stage of the driving season, with just a week to Labor Day, certainly speaks for the demand in crude,” Investing.com senior commodity analyst Barani Krishnan said after the report, adding that the 2.5-million-barrel drop at Cushing, the major hub for oil trading in Oklahoma, also provided a more bullish case for oil.
But Krishnan said the price action after the release suggested that markets are still not comfortable with the overall fundamentals of oil.
“That may have to do with the fact that production isn’t easing at all, standing at near-record highs of 12.3 million barrels per day,” he said.
U.S. crude prices gained 0.8% to $56.56 a barrel by 11:13 AM ET (15:13 GMT), lower than the $56.80 quoted prior to the publication.
London-traded Brent crude futures rose 1.5% to $60.95 a barrel, pulling back from $61.03 ahead of the release.
Nvidia climbed on Wednesday after a Wall Street analyst backed the chipmaker to leave its rivals behind as its growth story remains in the “early innings.”
Benchmark analyst Ruben Roy initiated coverage on the stock with a buy rating and a $210 price target, suggesting upside of more than 25% from its closing price of $167.87 a day earlier.
Nvidia climbed 2.1% in afternoon trading. It's up 28.4% on the year and 4.4% in the third quarter.
Nvidia is "uniquely positioned" to grow at a faster compound annual rate than its peers and is in the "early innings" of its growth story due to the "increasing use of GPUs across a diverse set of growth markets,” Roy said.
Earlier this week, Microsoft said it would use Nvidia’s RTX video graphics units to spice up the visuals of its popular world-building game "Minecraft."
Semiconductors have been a hot group this year. The Philadelphia Semiconductor Index was up nearly 1% on the day, taking its gains for the year so far to about 31%.
Gold prices dipped on Wednesday after just-released minutes from the Federal Reserve’s July meeting showed the central bank wanted to review more data before making future rate decisions, stopping short of suggesting a planned series of rate cuts.
That disappointed gold longs hoping the Fed would have sounded more dovish.
Gold prices fell in response to the news but remained above the key $1,500 level. Spot gold, reflective of trades in bullion, was down $1.45, or 0.1%, to $1,514.25 per ounce by 2:40 PM ET (18:40 GMT).
Bullion had moved back and forth between $1,500 earlier in the week as some investors bet the Fed wouldn’t add to its dovish tone ahead of its closely-watched Aug 22-24 Jackson Hole, Wyo. symposium.
Gold futures for December delivery, traded on the Comex division of the New York Mercantile Exchange, fell $3.20, or 0.2%, to $1,504.21 in post-settlement trade. It ended the session unchanged at $1,515.70.
According to the Fed’s July meeting minutes, it was important to assess incoming economic data to determine the future path of monetary policy.
Federal Reserve policymakers highlighted concerns about slowing global growth and trade tensions as headwinds, but stopped short of suggesting that a series of rate cuts should follow, according to the minutes of the Federal Reserve’s July meeting released Wednesday.
"Most participants viewed a proposed quarter-point policy easing at this meeting as part of a recalibration of the stance of policy, or mid-cycle adjustment, in response to the evolution of the economic outlook over recent months," the Fed minutes showed.
The Fed suggested that the best course of action would be to remain "flexible" and monitor incoming economic data amid uncertainty over when risks weighing on the economy, including the U.S.-China trade war would be resolved.
"In their discussion of the outlook for monetary policy beyond this meeting, participants generally favoured an approach in which policy would be guided by incoming information and its implications for the economic outlook, and that avoided any appearance of following a preset course," according to the release of the minutes.
At its July meeting, the Federal Reserve cited “the implications of global developments for the economic outlook as well as muted inflation pressures” as reasons for cutting rates for the first time since 2008.
The bullish movement of the USD/CHF came to a standstill, followed by a dramatic reversal from the 3-week high, after which China had announced that it would impose tariffs on US imports of $75 billion. The strong intraday pullback fell under the support of the lower end of the rising trend channel, confirming the bearish outbreak.
The technical indicators fell quickly into bearish territory on the 1-hour chart and lost positive momentum on the 4-hour/day chart, adding to the negative outlook.
If the weakness persists, losses can be extended below 0.9800 towards 0.9775, 0.9760 and 0.9730. On the other side are resistors at 0.9850 and 0.9880/85.
The bearish stance of the common currency is maintained at the end of the week, with EUR/USD trading in a narrow range as it recovers from the 1.1050 low.
The pair can recover with the increasing selling pressure against the greenback, after which China had announced to raise tariffs on US goods.
The US 10-year yield reached its daily low at 1.60%, benefiting the safe havens, dropping the USD/JPY.
Fed Chairman J. Powell's speech at the Jackson Hole Symposium is now in focus. There may be signs of further Fed interest rate cuts, while Powell will certainly talk about the outlook for the US economy and the ongoing trade war.
The euro remains under pressure, but a test of the annual low in the range of 1.1020 was spared him so far. The renewed buying interest in the dollar, expectations of ECB easing and Italian policy may influence sentiment against the single currency.
The US dollar has withdrawn, as a result of the US Dollar Index (DXY), almost 98.50 in Chinese news from the region of weekly peaks.
After China said that it will introduce 5% tariffs on US petroleum imports from 1 September it succeeds in keeping the favorable note. China will also levy tariffs on U.S. goods valued at approximately US $75 billion and, as of December 15, will restart 25% on US auto.
Currently, the Buck also lost part of its glamor, following St. Louis ' Fed J. Bullard (mega-dovish voters) advocating lower rates to meet the inflation objective and to respond to the inverted yield curve. The worldwide deceleration of the manufacturing sector is also concerning. Bullard observed. Bullard repeated that the labor market continues to do well in perhaps the only USD supportive remark.
This week, the primary concentrate will be the Jackson Hole Conference as well as any insights into Fed's plan on interest rates and the prospects for the US economy in the coming months. Meanwhile, whilst trade issues remain unrelated and combined with a yield curve reversal, the Federal Reserve has the ability to trigger further "insurance reductions," undermining the buck's positive opportunities during the next few months.
In an interview with CNBC, Cleveland Fed President Loretta Mester said she had not decided how to vote on interest rates at the next FOMC meeting.
Mester commented on China's retaliatory tariffs and said that this is a continuation of the existing trading uncertainty. Below are some additional comments that Reuters has reported.
"US consumers are still strong."
"The US economy is pretty resilient."
"I am prepared for the downside risks of the economy."
"Our interest rates should be higher than in Europe and China."
"Wages have risen."
"Business contacts always talk about trade uncertainty but still see good activity, albeit as expected slower than last year."
"Do not be afraid to miss anything if you wait for evidence of data slowdown."
As markets continue to rate the Fed's recent commentary and the recent developments surrounding the US-China trade dispute, the US dollar index in the range of 98.30 is clinging to its meager daily gains.
Additional comments from St. Louis Fed President James Bullard, who spoke with Bloomberg TV. Here are some important pointers that Reuters reported.
"Lower interest rates would help the US to cross the seething waters of the trade war."
"The Fed can afford to be dovish to raise inflation expectations."
"I'm not interested in testing the theory that" this time everything is different "in terms of reversing the yield curve."
The US dollar index continues to reduce its daily gains and, at 98.29, is just 0.08% above its opening price.
EUR/JPY is expanding sideways movement just below 118.50. Resistance is 118.86 with the 21-day SMA, followed by last week's high at 119.00. Overall, the prospects for the 55-day SMA of 120.64 and the multi-month resistance of 120.79 remain unchanged bearish.
The commodity gained acceptance under the 200-hour SMA and the 23.6% Fibo retracement of the $1400- $1535 upward move, giving the bear an edge.
The technical indicators are in negative territory on the hourly chart and this seems to support the outlook for a bearish eruption from the falling triangle, favoring a move down to last week's swing low of $1483/$81.
The daily chart oscillators are still in the bullish zone, allowing the redeemer to be seen as a buying opportunity before Fed Chairman J. Powell delivers his speech at the Jackson Hole Symposium in the evening.
Should the defense's support fail, it will come to technical sales and the losses can be extended towards $ 1475, the 50% retracement of $1467/$65 and $1450.
Resistances are at $500 psychological mark, $1507 200-hour SMA and $1522 multi-year high.
The AUD/USD pair on Friday neglected any strong guidance and saw tidy profits/minor declines almost weekly-around mid-0.6700s.
This, combined with a humble US Dollar upturn — backed by a pick-up in US Treasury bond yields — continued to collaborate to the pair's smoother tone on the latest day of trade, but the bottom line was restricted before the planned lecture by Fed President Jerome Powell later in the North American session during the Jackson Hole Conference.
Given that a more rate reduction is fully priced at the September conference, the remarks by Powell will be examined carefully to see whether the central bank is ready to further slash the prices. If Powell does not indicate hostile strategy relaxing, it is more probable that the USD will build upon its latest momentum and press the major backward.
Meanwhile, the pair seems more probable to stay restricted to a small trading group, with a slight enhancement in the worldwide risk perception, as illustrated by a favorable trading feeling in stock markets – which will at least extend some assistance to the presumed riskier Aussie currency, working to limit the drawback.
GBP/USD does not reach a high level of three weeks sooner and is currently falling to 1.2230 when it heads to London on Friday.
The exponential average movement (EMA) of 21 days and the 23.6% Fibonacci retracing down from June to August, around 1.2200/2195, receive instant attention from sellers as this maintains the key to a decline from 1.2100.
If sellers stop taking their way back to about 1.2100, 1.2050 and monthly low by 1.2015 could be their favorites.
It is also to be observed that if bears prevail last-1.2015 the year 2017 bottom from 1.1987 and 2016 at 1.1806 may be re-introduced in charts.
Karen Jones, Head of FICC Technical Analysis at Commerzbank, notes that the EUR/USD rebound was weak and the pair remains on the combative.
“Intraday Elliott wave counts suggests that intraday bounces should struggle circa 1.1150. Beyond this attention remains on the 1.1027 recent low and the base of its down channel at 1.0955. Below here lies the 78.6% retracement at 1.0814/78.6% retracement. Nearby resistance is the 200 day ma at 1.1284, but key resistance is 1.1343/65, the 2018-2019 down channel and the 55 week ma. A weekly close above this latter level is needed for us to adopt an outright bullish stance.”
“The market will need to regain the 55 week ma and channel at 1.1343/65 to generate upside interest.”
The quote brings the offers to the Europe market on Friday with an uptrend trendline of one week depicting the significance of the USD/JPY pairs. On Friday, it will take 106.60.
Buyers will instantly pay attention to 106.65/70 horizontal areas, consisting of several peaks, since the start of the month. The price breaks can rapidly push them up to 107.00, while July is small by 107.21 afterward could please buyers.
On the other hand, a Fibonacci level of 106.50 of 23.6% can be instant support before the 106.30 support line is indicated.
If the sellers sneak up and crack the main trend line assistance, 50% Fibonacci retraction could take place on their radars from 106.00 to August 14 at about 105.65.