U.S. Stocks Rebound Late After White House Denies WSJ Report on New Technology Restrictions Against China

Asian stock markets are under pressure early Tuesday in reaction to a steep sell-off in U.S. stocks related to a report of possible new threats from the United States that could escalate the trade dispute between the U.S. and China.

At 0036 GMT, Japan’s Nikkei is trading 22127.53, down 210.62 or -0.94%. The weakness is being primarily driven by a sell-off in technology stocks and automakers.

South Korea’s Kospi is trading 2342.07, down 15.81 or -0.67% and Australia’s S&P/ASX 200 is lower by 36.50, or -0.59% at 6173.90.

The selling in the Asian equity markets is being fueled by steep losses on Monday in the United States. U.S. stocks tumbled yesterday following week-end news that U.S. President Donald Trump intends to block some Chinese companies from investing in U.S. technology.

The blue chip Dow Jones Industrial Average fell 1.33 percent, or 328.09 points, to settle at 24,252.80. More importantly for chart watchers, it finished the session below its 200-day moving average, a key technical level, for the first time since June 2016. This move could lead to heightened volatility due to increased computer-generated trading.

Additionally, the benchmark S&P 500 Index settled at 2717.07, down 37.81 or 1.37% and the tech-driven NASDAQ Composite closed at 7535.59, down 157.23 or -2.04%.

Up until Monday, the technology-based NASDAQ seemed to be mostly immune to the increasing trade tensions between the United States and China with the index reaching a new all-time high just last week. During Monday’s session, however, shares of chipmakers Intel, Micron Technology and Nvidia all fell at least 3.4 percent – major technology corporations with significant exposure to China.

Shares of Netflix were a major drag on the NASDAQ, suffering their worst day in nearly two years Monday. Netflix fell 6.5 percent, its biggest drop since June 2016.

The semiconductor sector also plunged with chipmaker Micron shedding nearly 7 percent. AMD and Nvidia each lost more than 4 percent.

Silver Lining?

There may be a silver lining in all of this selling pressure. Remember that investors were reacting to a report in The Wall Street Journal and not an actual event. This led to messages from the White House that contradicted the report in The WSJ.

Treasury Secretary Steven Mnuchin said the investment restrictions, reported by The Wall Street Journal, were “false, fake news,” but said that the measures would apply to “all countries” instead of just China.

Shortly thereafter, White House economic advisor Peter Navarro told CNBC that there were “no plans” to impose restrictions targeting foreign investments.

U.S. stocks rebounded late in the session in reaction to the White House comments. Early Tuesday, U.S. futures contracts are trading slightly better during the pre-market session.