13 May IT IS ALL ABOUT TRADE
Equities clawed back from their early morning declines. Bloomberg writes at market lows FANG accounted for about 50% of Friday’s decline. This should be expected given FANG’s large Chinese exposure. Of the $200 billion in goods that will be immediately impacted with a 25% tariff, Bloomberg writes that about 45% is directly related to technology.
The US gave its bottom line saying Beijing had three to four weeks more to reach an agreement before the Administration enacts tariffs on another $325 billion of Chinese imports. Talks were regarded as “constructive” and talks went “fairly well.”
It is widely accepted the tariffs would impact China more than the US thus suggesting the US is in a position of strength.
Estimates vary widely regarding the impact of a trade war. Perhaps the only certainty that can be written a trade war may impact the technologies by the greatest amount given that over 59% of their sales are abroad and the vast majority of their production facilities are located in China. Friday’s market action may have validated this view.
An issue that could be at hand is the total domination these companies have regarding the capitalization of the popular market indices.
Will trade again be the overriding narrative for the coming week? The economic calendar is heavy consisting of several manufacturing indices, retail sales, confidence surveys and import prices.
Last night the foreign markets were down. London was down 0.07%, Paris down 0.53% and Frankfurt down 0.71%. China was closed for a holiday, Japan down 0.72% and Hang Sang closed for a holiday.
The Dow should open down about 1.5% and NASDAQ down about 2.5% on trade concerns. And then there is oil which is up about 2% following reports of “unnamed countries” attacking several oil tankers in the Persian Gulf. The 10-year is up 12/32 to yield 2.43%.