Futures Flat, Trade Tensions In Focus, China Won’t Back Down

Trade relations remains in focus and geopolitical risk escalates after China indicates it won’t back down to U.S. demands.
Thomas Hughes
Wall Street Bull

The U.S. Futures Are Flat In Early Trading

The U.S. futures are flat in early Monday trading. Trade tensions remain in focus albeit the messages remain mixed. President Donald Trump says the U.S. isn’t ready to make a deal with China but also that a deal will come soon. China, through a media mouthpiece, has suggested it won’t back down to U.S. demands. The impasse is seemingly unsolvable and likely to last far longer than first anticipated.

Meanwhile, the U.S. is making moves to conclude trade deals with just about every one of its partners except China. With tariffs removed from Canadian and Mexican metals and a deal with the EU and Japan likely, there is little reason to fear a global recession; growth will happen, just not in China. The Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite are all indicated to open with little to no movement.

In economic news, the yield on the 10-year Treasury rebound from Friday lows. The yield curve remains inverted but slightly less so than last week. Later in the day traders will be looking for reports from the Richmond and Dallas Federal Reserve Banks. Later in the week, traders will be on the lookout for the 1st quarter GDP revision and the all-important Personal Income & Spending and Core Consumer Inflation on Friday.

EU Flat And Mixed, Geopolitics In Focus

The EU Indices were flat and mixed in early Monday trading. Geopolitics, including but not limited to U.S./China trade relations, were in focus. Closer to home, EU parliamentary elections concluded over the weekend. The results are generally as expected but far-right nationalist/protectionist factions gained strength. Despite this fact, analysts think the showing put forth by Europhile and liberal parties indicates the EU will remain intact, at least for now. The French CAC led the day’s move with a loss of -.36%, the DAX trailed at -0.25%, and the UK FTSE 100 advanced 0.07% in midday trading.

In the UK, the nationalist “Brexit Party” won elections to the EU parliament. The move is a surprise to many and may pave the way to an easier Brexit situation than looks apparent now. Political turmoil has traders on edge elsewhere in the EU as well. Italy’s growing deficit issue has it at odds with the EU. Banks led the market lower with losses near -0.9%, banks in Italy led the group.

Trade Relations Dim, Chinese Isolation To Continue

Asian markets were broadly higher despite the downturn in U.S./Chinese trade relations. The Shanghai Composite led the advance with a gain of 0.61% with most others not far behind. The Australian ASX is runner-up at 0.51%, the Nikkei and Hang Seng 0.37% and 0.38%, and the Korean Kospi 0.23%. In Japan, shares of Tokyo Electric were among the biggest gainers after announcing a share buyback. In Hong Kong shares of Tencent were at the fore with an advance of 1.0%.

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