U.S. Producer Prices Post Biggest Annual Increase in 6-1/2 Years

Asian shares are poised to open mixed on Thursday as lingering fears over an escalating trade dispute between the United States and China continue to make global investors jittery. The catalyst behind the renewed fears by traders is the Trump administration’s announcement of a fresh list of Chinese goods that may be subject to new tariffs.

The early trade shows Japan’s Nikkei up 172.41 or +0.79% at 22104.62. In Australia, the ASX 200 is trading at 6238.80, up 23.20 or +0.37%.

After the Trump administration on Tuesday unveiled a list of 10 percent tariffs on $200 billion in Chinese products, China threatened to retaliate with “qualitative measures,” Reuters said, with the country’s commerce ministry adding that it would complain to the World Trade Organization.

U.S. Stock Markets

The major U.S. stock indexes finished sharply lower on Wednesday as investors shed risky assets after the Trump administration revealed a new list of additional tariffs on China.

The benchmark S&P 500 Index settled 0.71 percent lower at 2,774.02. The move was primarily driven by a steep drop in the energy sector which plunged more than 2 percent. Energy stocks were pressured by a 5 percent drop in crude oil prices.

The blue chip Dow Jones Industrial Average dropped 0.88 percent to 24700.45. Big name stocks like Caterpillar, DowDuPont and Chevron were the biggest losers. Caterpillar was driven by the escalating trade dispute. Chevron fell victim to the plunge in crude oil prices.

Chipmakers which faced exposure over the trade dispute with China, including Nvidia, Intel and Advanced Micro, all dropped more than 1.5 percent. This dragged down the NASDAQ Composite, which closed at 7716.06, down 0.56%.

U.S. Economic Data

U.S. producer prices increased slightly more than expected in June amid gains in the cost of services and motor vehicles, leading to the biggest annual increase in 6-1/2 years.

According to the U.S. Labor Department, the producer price index for final demand climbed 0.3 percent last month also lifted by increases in gasoline prices. In the 12 months through June, the PPI advanced 3.4 percent, the largest gain since November 2011. Traders were looking for an increase of 0.2 percent and an annual gain of 3.2 percent.

The Core PPI also rose 0.3 percent in May. Economists had forecast a gain of 0.2 percent. In the 12 months through June, the core PPI rose 2.7 percent.

In other news, Final Wholesale Inventories rose a disappointing 0.6 percent. This was slightly higher than the 0.5 percent forecast.

Additionally, according to The Wall Street Journal, “The boost to U.S. economic growth from recent tax cuts and spending increases, together with more-stable price pressures, has made Federal Reserve officials comfortable with raising interest rates more than they anticipated earlier this year.