The U.S. Market Rebounds, Trade Fears Ease, Uncertainty Remains The Only Certainty

Global markets are mixed following an escalation of trade tensions. A trade war is the new status quo.
Thomas Hughes

The U.S. Market Rebound From Monday’s Low

The U.S. futures are indicating a positive open on Tuesday morning. The moves comes after the PBOC backed off of its currency easing gambit. The Chinese Central Bank surprised most market watchers by pinning the midpoint for the yuan below the closely watched 7.00 level. Despite the move, the U.S. Treasury officially labeled China a currency manipulator raising the stakes in the trade war. The Dow Jones Industrial Average and S&P 500 are both looking to open with gains near 0.85% while the NASDAQ Composite is posting a slightly larger gain.

Shares of China-sensitive stocks like Caterpillar, Apple, and Micron were all moving lower in early trading despite the shift in market sentiment. Shares of Ford bucked the trend after Morgan Stanley upgraded the stock. Morgan Stanley says a more focused product lineup will drive future profits and raised their price target. Shares of Canada’s leading cannabis cultivator Aurora Cannabis jumped more than 5.0% after releasing preliminary results that are better than expected.  Shares of Dean Foods fell nearly -30% in early trading after it revealed dairy inflation was cutting into profits.

EU Markets Move Higher As Trade Fears Ease

All sectors and bourses moved higher in the EU after the PBOC publicly stated it was not a currency manipulator. The PBOC says the label seriously undermines international rules and will have a major impact on global finances. Traders who breathed a sigh of relief when the PBOC set the yuan’s midpoint should be cautioned. The trade war is still in full effect and uncertainty is the only certainty.

The UK FTSE 100 is hugging the flat-line at midday while the DAX and CAC are both trading higher. The DAX is up about 0.35% despite some weak data while the CAC is up a stronger 0.70%. In Germany Industrial Production and PMI figures were both weak. German IP rose 2.5% MOM but is down -3.6% YOY while PMI fell to 49.5 and into contractionary territory. The data is worrisome as it shows continued slowing and contraction within the EU. It is a blessing because it assures the ECB will act to stimulate the economy very soon. Shares of Deutsche Post and Rotork were both up strongly on earnings results while Metro fell more than -6.0% on a crumbling takeover bid.

Asia Follows Wall Street Lower

Asia followed Wall Street lower in the early Tuesday session. The gains were pared by the end of the session but left the ASX down nearly -2.44% and the Shanghai and Kospi down about -1.50%. The PBOC’s move to strengthen the yuan was reassuring but traders remain cautious. The U.S. latest tariffs are still expected to come into effect at the end of this month. The Chinese government also affirmed reports it was no longer buying U.S. agricultural products which confirms the trade war is still on.

 

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