Global Markets Crash, Trade Truce Is Broken, U.S. Wage Inflation Ticks Higher

Global markets tank after Trump breaks the trade truce, 10% tariffs on $300 billion of Chinese goods go into effect September 1, 2019.
Thomas Hughes

The U.S. Markets Are Down In Early Trading

The U.S. futures are indicating a lower open on Friday as trade woes weigh on market sentiment. The major U.S. indices affected a sharp turnaround in Thursday trading after President Trump broke the U.S./China trade truce. Trump says another 10% of tariffs on $300 billion of Chinese goods will go into effect September, 1. The reason for the new tariffs is unclear, trade talks earlier in the week did not produce satisfactory results but another round of meetings is set for September. The Dow Jones is lagging in early trading with a loss of -0.25%, the S&P 500 is down about -0.35% and the NASDAQ leads with a loss of -0.70%.

Futures firmed slightly after the NFP report was released but losses dominated the day. According to the non-farm payrolls report the number of new jobs rose by 164,000, just 1,000 off the consensus. With revisions, the number of net new jobs for July totaled 143,000. The unemployment rate and the number of unemployed persons is unchanged. The key data point is the wage figures, monthly wages increased by 0.28% and YOY wage gains ticked up to 3.2%.

In earnings news, shares of Exxon Mobil are moving higher in pre-market action. The worlds largest energy company by market cap says revenue and earings are above expectations. The biggest driver of results was production in the Permian Basin which improved 90% from the previous year.

Global Markets Sink After Trade Truce Is Broken

Global markets are sinking in the wake of Trump’s new tariffs. The EU markets are in the lead with the DAX and CAC both down about -2.70%. The FTSE 100 is lagging the decline but still down close to -2.0% at midday. In the UK, traders are watching a new development in the Brexit process. The Liberal Democratic Party won a key seat in Wales that reduces newly elected PM Boris Johnson’s parliamentary majority to a mere one seat. Johnson has pledged to take the UK out of the EU with or without a deal.

In earnings news, the financial sector is in the spotlight. Shares of RBS and Credit Agricole are both moving sharply lower after their results failed to meet investor expectations. The difference is that RBS beat expectations and provided weak guidance while Credit Agricole reported a 15% decline in YOY EPS. Shares of Allianz advanced more than 2.7% after it beat consensus estimates.

Asia Moves Lower After Trade War Escalation

Asian markets closed broadly lower on Friday as traders fret over the latest salvo in the trade war. The Hong Kong Hang Seng led the rout with a loss of -2.35% followed by a -2.11% decline in the Nikkei. The Shanghai Composite fell nearly -1.50% while the Kospi and Australian ASX both shed less than -1.0%. Chinese Foreign Ministry officials say China does not want a trade war but is not afraid to retaliate, the U.S. needs to give up its illusions and get the talks back on track.

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