New US tariff round prompts investors to switch to risk off
S&P 500 closes 0.5% from January record close
Tesla shares spike on Musk's plan to take the group out of the public market
European stocks followed the majority of Asian shares into red territory on Wednesday after the US said it will start imposing 25 percent duties on an additional $16 billion worth of Chinese imports on August 23. Futures on the S&P 500, Dow and NASDAQ 100 are wavering around neutral levels, suggesting the news may prompt a slowdown from yesterday's rally in the US session as well.
The STOXX Europe 600 opened lower, paring half of yesterday’s advance in early trade, as renewed trade tensions once again stole the spotlight and mixed corporate results gave traders one more reason to stay on the cautious side.
German power utility E.ON’s earnings plunged 32.4 percent, offsetting Glencore (LON:GLEN)’s 13 percent net income jump. Technology was the bright spot after Samsung (KS:005930) unveiled a $161 billion investment plan.
Earlier, during Asian trade, China’s Shanghai Composite underperformed its regional peers, slipping 1.27 percent lower and giving up about half of yesterday’s surge. However, Hong Kong’s Hang Seng closed 0.39 percent higher, helped by the fact that foreign investors use it as a portal to Chinese stocks. According to the South China Morning Post, overseas purchases of Chinese shares hit $4.1 billion during the past three weeks, while local traders were discouraged by trade war fears. Perhaps quelling some of those fears, fresh data showed today China’s exports grew faster than expected in July and imports surged.
Yesterday, US shares extended their winning streak to a fourth day, as investors managed to keep their focus squarely on positive economic and earnings headlines.
The S&P 500 gained 0.28 percent, boosted by stocks in the Energy (+0.74 percent) and Industrials sectors (+0.71 percent). Consumer Staples (-0.61 percent) underperformed. Technically, the price gapped up and formed a shooting star, with a close 0.5 percent below its January 26 record high. The shooting star, already bearish as it retraced from the session highs, could be the centerpiece of an Island Reversal, in Western technical analysis, or an Evening Star in Japanese candlesticks, if followed with a falling gap.
Meanwhile, Tesla (NASDAQ:TSLA) stock leaped higher after CEO Elon Musk said he’s considering taking his company private for $420 per share, which would set the group's market value at about $71 billion. Shares soared 10.8 percent, or $37 higher, after the announcement, to $386.68. Technically, the intraday price neared the all-time high of $389.61 posted September 18 and retreated, underscoring a resistance level.
Overall, stocks retreated from higher gains late in the session, as traders rotated out of some bond proxy positions to buy into Treasurys, after a bond selloff sent yields higher. During morning European trade, Treasury yields had stabilized ahead of the biggest-ever 10-year note auction.
The dollar bounced back against most of its major peers yesterday. Technically, this is the greenback’s fourth attempt to overcome the 95.50 level. An upside breakout would demonstrate that demand absorbed available supply and is bidding prices higher to find willing sellers.
Oil’s eked out a third straight gain, after Iran’s foreign minister said that US sanctions will not choke Iran oil exports. However, the commodity is back into negative territory at the time of writing.
Canadian Building Permits for June are released Wednesday.
Canada’s S&P/TSX Composite declined 0.84 percent on Tuesday.
The STOXX 600 dropped 0.3 percent.
Futures on the S&P 500 slipped less than 0.1 percent.
The MSCI Emerging Market Index climbed 0.3 percent.
The Canadian loonie was down 0.22 per cent against the U.S. greenback early Wednesday, trading at 0.7643.
The Dollar Index gained 01 percent.
The euro climbed 0.2 percent.
Canada’s 10-year yield was steady early Wednesday at 2.370, a 0.09-percent decrease.
The yield on 10-year Treasuries rose less than one basis point to 2.97 percent.
Germany’s 10-year yield held steady.
WTI advanced 0.05 percent.
Gold eked out a 0.01 percent.
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