Friday, May 29, 2020

Asia Times: Trump schedules a press conference Friday, renewing investor caution for rising tensions between the US and China

Tags
  • China
  • Dollar
  • Gold
  • Yen
  • Stocks
  • Oil

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Market Recap: Trump schedules a press conference Friday, renewing investor caution for rising tensions between the US and China

Stocks in the US erased early gains on Friday, ending a three-day gaining streak after US President Donald Trump said that he will be holding a press conference on Friday to discuss China. Trump's announcement for a press conference comes on the heels of a comment earlier in the week that his administration was working on a strong response to China's national security legislation for Hong Kong that was approved by lawmakers on Thursday. Investors are likely expecting some form of a response as a result, which would mean that US-China relations may intensify further over the weekend. Sector performance was mixed on Thursday, with utilities leading gains among S&P500 sectors. The energy and financials sector fell the most.

In company news, social media companies Facebook and Twitter faced downward pressure on stock prices on Thursday, after Trump said that he would be signing an executive order to limit liability protections social-media companies enjoy after Twitter signalled that it had started to conduct fact checks of the President's tweets. Earlier this week, Twitter labeled two of Trump's posts "potentially misleading" and provided to news coverage of his comments, sparking outrage from Trump. Twitter dipped 4.45% while Facebook fell 1.61% on Thursday as a result. The White House said that Trump had signed the executive order after the US stock market closed on Thursday.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones -0.58% -147.63 25,400.64
S&P500 -0.21% -6.40 3,029.73
Nasdaq -0.46% -43.37 9,368.99
*Source: Bloomberg

The greenback fell against all major currencies except the Canadian loonie likely as pessimism for the US labour market eased after continuing jobless claims in the US fell for the first time since the onset of the Covid-19 pandemic. Initial jobless claims fell as well, dropping to 2.1mn for the week ended May 22nd from 2.4mn a week before. Continuing claims fell to 21mn from 25mn the week before, beating economists' estimates. Durable goods orders and its sub-indices also beat estimates for April, although the dataset continued to signal that transport-related sectors continue to face high amounts of pressure. The dollar as a result fell throughout the earlier trading hours in the US, but recovered slightly towards the end of the US trading session after Trump's press conference announcement.

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Demand for safe haven assets returned slightly on Thursday. Gold remained mostly negatively correlated with the dollar on Thursday, possibly as investors switched from equities to gold positions to hedge some risk while at the same time taking profit on some positions. Gains were seen for both gold and the yen towards the end of the trading session on Thursday, as fear for another escalation in US-China tensions dominated market sentiment. Gold looks likely to be set for gains leading up to Trump's press conference as a result of greater uncertainty. US Treasuries were mixed, shorter-term treasuries gained while longer-termed ones fell. Benchmark 10-year yields inched 0.8bps higher to 0.69% as a result.

Safe Haven Assets Daily Change (%) Net Change Closing Price
Gold +0.52% +8.86 1,718.33
Silver +0.64% +0.11 17.19
JPY +0.07% +0.07 107.65
*Source: Bloomberg
US Treasury yields Daily Change (bps) Yield (%)
2-Year -1.0 0.17%
10-Year +0.8 0.69%
30-Year +1.2 1.45%
*Source: Bloomberg

Oil futures recovered some losses after the selloff on Wednesday, pushing both Brent and WTI crude oil futures back to trade higher over the week. The weekly crude oil inventories report from the Energy Information Administration (EIA) in the US likely helped eased the selloff from a report earlier in the week suggesting that crude oil supply was increasing yet again. The EIA's weekly report indicated that crude oil inventories in the US rose over 10mn barrels last week of which 2.1mn were additions to the Strategic Petroleum Reserve. Demand was implied to be recovering, with the rolling average for gasoline supplied to the market up for the fourth straight week. Crude oil inventories at Cushing, Oklahoma was also down for a third straight week. Brent and WTI crude oil futures rose 1.58% and 2.74% respectively on Thursday as a result.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +1.58% +0.55 35.29
WTI Crude +2.74% +0.90 33.71
*Source: Bloomberg

In Asia, stocks were trading lower in the first hour of the Friday’s trading session, highlighting the renewed caution for an escalation in tension between the US and China. The ASX200 fell the most on Friday's open, dropping more than 1% in the first hour of the trading session while the Nikkei and KOSPI inched lower. Weak industrial production in Japan for (A: -9.1% MoM, E: -5.7% MoM) will probably weigh on investor sentiment in Asia on Friday as well. Futures tracking major indices in the US were also trading lower as of 8.36am (GMT +8). Investors today will be focused on Trump's press conference as well as personal income and spending data in the US. Revisions to the University of Michigan’s consumer sentiment index is likely to be taken note of by the financial market as well.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.18% -39.47 21,878.46 8:26:45 AM
KOSPI Index -0.15% -3.11 2,026.12 8:46:40 AM
ASX200 Index -1.10% -64.60 5,784.90 8:46:45 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures -0.45% -115.00 25,337.00 8:36:56 AM
S&P500 Futures -0.40% -12.25 3,025.00 8:36:54 AM
Nasdaq Futures -0.39% -37.00 9,420.00 8:36:56 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • Germany Apr Retail Sales (2pm)
  • Eurozone May Inflation Rate (CPI) (5pm)
  • US Apr Inflation Rate (PCE) (8.30pm)
  • US Apr Personal Income/Spending (8.30pm)
  • Canada Q1 GDP (8.30pm)
  • US May Consumer Sentiment (U. of Mich) (F) (10pm)