Trade Talks Roil Markets, Volatility Rises, Tariff Threats Loom Closer

Renewed trade fears weigh on stocks, Liu He is still expected in Washington but an end to trade disputes is far from likely.
Thomas Hughes
Wall street, NYSE stock exchange building

Trade Tensions Rise, Market Calm Shattered

A series of Trump Tweets has roiled global markets. His threat to increase tariffs on Friday and to impose new tariffs soon has shattered the market calm. Futures trading in the U.S. indicates another big drop for equities and this may only be the beginning. The tech-heavy NASDAQ Composite with its heavy exposure to China and Asia is leading the losses on Tuesday. The index is indicated down about -1.0% with the Dow Jones Industrials and S&P 500 close behind.

Caterpillar and Boeing were among the days biggest losers, down -1.0% and -1.5% respectively, but there were not the only ones. Shares of Marriot Vacations were edging lower, about -0.15%, after missing top and bottom line expectations. Lumentum, maker of lighting and photographic solutions, saw its shares fall after beating consensus estimates. The company provided light guidance for the coming year and sent shares down about -0.70%.

In economic news traders will be waiting on the JOLTs report. The JOLTs report is a gauge of job openings and labor market confidence and is due out at 10 AM. The JOLTs report has shown job openings and labor market confidence trending at all-time highs. Later this week the PPI comes out on Thursday and the CPI on Friday.

Europe Moves Lower, FTSE 100 At A 1-Month Low

Equities indices in the EU moved lower on Tuesday. Traders are cautious about the U.S. tariff threat and how it may impact the EU. Not only is the EU in the crossfire between the U.S. and China it too must negotiate trade terms with the U.S. later this year. The UK FTSE 100 led the losses, down about -1.10%, and set a new one-month low in the process. Banks were among the worst performers, down 1.8% as a group, with Barclay’s and HSBC down more than 2.0%. The utility sector was among the best performers, up about 1.8% at midday.

Shares of BMW fell more than -2.0% after the automaker reported EPS fell -78.0% from last year. Thomas Cook, an airline, saw its shares surge more than 10% after Lufthansa confirmed it would put in a non-binding offer to purchase some assets. In economic news, German new orders rose from last month but not as much as expected. This comes after several months of contraction and does little to encourage investors.

Volatility Rises As Tariff Threats Loom Closer

The VIX index, the fear index, has risen to a six-week high on the back of Trump’s renewed tariff threat. The index is pointing to a major decline in global equities, Asia included. Asian indices were mixed on Tuesday but the action was muted. Chinese markets posted small gains but there were little more than a dead cat bounce. The Japanese Nikkie reopened after an extended holiday and fell -1.51%. Shares of Fanuc, heavily exposed to China, fell -3.0%. The Australian ASX was able to advance 0.19%, the Korean Kospi fell -1.0%.

On a positive note, China has confirmed that Liu He will still attend a delegation in Washington later this week. His attendance was questionable following the Trump Tweets but a good sign a deal is still possible.

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