Thursday August 23rd

23-08-2018

US stocks set for slip as US-China trade spat deepens; central bankers gather at Jackson Hole

U.S. stock index futures traded flat Thursday, as the U.S. and China hit one another with a new round of tariffs. Dow Jones Industrial Average futures hovered around the flatline, indicating a slight decline of 12.60 points. S&P 500 and Nasdaq 100 futures also pointed to slight losses at the open. The U.S. began collecting additional 25 percent duties on 279 Chinese import product categories identified by U.S. Trade Representative. Key products that will be hit by the duties include semiconductors, chemicals, plastics, motorbikes and electric scooters. Beijing retaliated with its own fresh tariffs on $16 billion worth of additional imports from the U.S. including fuel, steel products, autos and medical equipment. The U.S. and China held talks on Wednesday that are set to continue into Thursday, but observers did not have high hopes after President Donald Trump said he did not "anticipate much" to be resolved, in an interview with Reuters. Domestic political news also weighed on sentiment, amid legal troubles surrounding Trump's former personal attorney Michael Cohen and ex-campaign manager Paul Manafort. Trump on Wednesday lashed out at Cohen, saying he wouldn't advise seeking the lawyer's services. The legal troubles have raised questions about whether Trump will remain in office. In an interview with "Fox and Friends," Trump said: "If I ever got impeached, I think the market would crash. I think everybody would be very poor." Still, the market does not seem to care about Trump's legal issues at this point, said Nicholas Colas, co-founder of DataTrek Research, in a note. "That US stocks recovered [Wednesday] is a good reminder that 2018 is not 1974," Colas wrote. "Back then, oil prices had just risen 4x and the global system of fixed exchange rates was imploding" as former President Richard Nixon resigned under the threat of impeachment. "Now, rates are low, the dollar is strong and corporate earnings remain robust. Those are the only things stock prices can (and should) actually discount." Nevertheless, the current U.S. bull market has found its way into the history books, becoming the largest on record, spanning 3,453 days. Leading central bankers are due to meet for an economic symposium at Jackson Hole in Wyoming on Thursday, where they will discuss the future of monetary policy. Federal Reserve Chair Jerome Powell will address attendees in a speech Friday. In economic data, initial jobless claims, a tracker of sorts for layoffs in the U.S., fell slightly in mid-August and hovered near a 49-year low. New claims declined by 2,000 to 210,000 in the seven days from Aug. 12 to Aug. 18. Economists polled by MarketWatch had forecast a 215,000 reading. The more stable monthly average of claims slipped by 1,750 to 213,750, the government said Thursday. The number of people already collecting unemployment benefits was barely changed at 1.73 million. These are known as “continuing” claims. The flash Composite Purchasing Managers' Index (PMI) data are due at 9:45 a.m ET. Asia markets closed mixed on Thursday — with mainland China markets recovering — as investors look to the trade talks between Beijing and Washington following the imposition of new U.S. tariffs on Chinese goods during Asian hours. The mainland China markets recovered from their earlier losses to close higher. The Shanghai composite ended the trading day up by 0.37 percent around 2,724.63 while the Shenzhen compositeclosed 0.631 percent higher at about 1,463.69. The smaller NASDAQ-style Chinext Composite ended the day up 1.10 percent to close at 1,758.06. Hong Kong's Hang Seng index traded down by 0.42 percent at 3:03 p.m. In Japan, the Nikkei 225 closed in positive territory, up by 0.22 percent at 22,410.82. South Korea's KOSPI recovered from its earlier losses to close up by 0.41 percent at 2,282.60. Oil prices steadied on Thursday as an escalating trade dispute between the United States and China offset news of a decline in U.S. commercial crude inventories. Benchmark Brent crude oil was down 4 cents a barrel at $74.74 by 8:22 a.m. ET (1222 GMT). U.S. light crude was 6 cents higher at $67.92. Both contracts rose by more than $2 a barrel in the previous session after the U.S. government reported a bigger-than-anticipated drop in crude stockpiles. Gold prices faltered on Thursday, under pressure from a stronger dollar as the U.S. Federal Reserve reaffirmed intentions to raise interest rates and trade tariffs between the United States and China kicked in. The precious metal failed to confirm its brief break through $1,200 on Wednesday, a key psychological level, as the dollar resumed its ascent. Spot gold was down 0.4 percent at $1,190.61 an ounce. Prices hit their highest since Aug. 13 at $1,201.51 in the previous session.