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Concerns About Trump Press Conference May Weigh on Wall Street
US Market
The major U.S. index futures are currently pointing to a lower opening on Friday, with stocks likely to extend the pullback seen late in the previous session.
The downward momentum on Wall Street comes as traders express concerns ahead of President Donald Trump’s planned press conference on China.
Traders seem worried that Trump may impose sanctions on China after Beijing approved a controversial security law on Hong Kong that could dramatically erode the special administrative region’s autonomy.
Trump has also repeatedly blamed China for the coronavirus pandemic, leading to rising tensions between the two economic superpowers.
After seeing strength for much of the session, stocks came under pressure in the final hour of trading on Thursday. The major averages pulled back off their highs of the day and into negative territory.
The major averages climbed off their lows going into the close but still ended the day in the red. The Dow fell 147.63 points or 0.6 percent to 25,400.64, the Nasdaq slid 43.37 points or 0.5 percent to 9,368.99 and the S&P 500 dipped 6.40 points or 0.2 percent to 3,029.73.
The late-day pullback on Wall Street was attributed to Trump announcing plans to hold a news conference about China on Friday.
China has recently stepped up efforts to curtail Hong Kong’s independence, raising concerns that Trump may announce new measures that ramp up recent tensions with China.
The strength seen for much of the day came following the release of a report from the Labor Department showing a continued decrease in first-time claims for unemployment benefits in the week ended May 23rd.
The Labor Department said initial jobless claims dropped to 2.123 million, a decrease of 323,000 from the previous week’s revised level of 2.446 million.
Economists had expected jobless claims to fall to 2.100 million from the 2.438 million originally reported for the previous week.
With the decrease, jobless claims pulled back further off the record high of 6.867 million set in the week ended March 28th.
Meanwhile, the Commerce Department released a separate report showing a substantial decrease in new orders for U.S. manufactured durable goods in the month of April.
The report said durable goods orders plunged by 17.2 percent in April following a revised 16.6 percent nosedive in March.
Economists had expected durable goods orders to plummet by 19.0 percent compared to the 14.4 percent slump originally reported for the previous month.
Housing stocks showed a substantial move to the downside on the day, dragging the Philadelphia Housing Sector Index down by 3.9 percent.
The weakness in the sector came after the National Association of Realtors released a report showing a steep drop in pending home sales in the month of April.
Significant weakness was also visible among banking stocks, as reflected by the 3.6 percent nosedive the KBW Bank Index.
Computer hardware, energy and semiconductor stocks also saw considerable weakness on the day, while strength remained visible among utilities, pharmaceutical and chemical stocks.
U.S. Economic Reports
Reflecting the distribution of stimulus checks by the federal government, the Commerce Department released a report on Friday unexpectedly showing a substantial increase in U.S. personal income in the month of April.
The Commerce Department said personal income spiked by 10.5 percent in April after tumbling by a revised 2.2 percent in March.
The jump in personal income came as a surprise to economists, who had expected income to plunge by 6.5 percent compared to the 2.0 percent slump originally reported for the previous month.
Meanwhile, the report showed a steep drop in personal spending, reflecting the impact of the coronavirus-induced lockdown.
The Commerce Department said personal spending plummeted by 13.6 percent in April after a revised 6.9 percent slump in March.
Economists had expected spending to tumble by 12.6 percent compared to the 7.5 percent nosedive originally reported for the previous month.
At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of May. The Chicago business barometer is expected to rise to 40.0 in May from 35.4 in April, although a reading below 50 would still indicate a contraction in activity.
The University of Michigan is due to release its revised reading on consumer sentiment in the month of May at 10 am ET. Economists expect the consumer sentiment index to be upwardly revised to 74.0 from the preliminary reading of 73.7.
At 11 am ET, Federal Reserve Chair Jerome Powell is scheduled to speak in a webcast discussion with former Federal Reserve Board Vice Chairman Alan Blinder.
Europe
European stocks have fallen on Friday after recent sharp gains as investors braced themselves for U.S. Donald Trump’s press conference later today amid a deepening rift with Beijing over Hong Kong.
Trump is expected to speak later today in a press conference after China’s parliament approved the controversial security law on Hong Kong, undermining the city’s reputation as a financial hub with substantial autonomy.
While the French CAC 40 Index has fallen by 0.4 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both down by 0.9 percent.
French automaker Renault has moved sharply lower after announcing it would lay off about 15,000 of its employees worldwide.
German automaker Volkswagen has also tumbled after it agreed to invest 2.1 billion euros ($2.33 billion) in two separate Chinese electric vehicle players.
Hugo Boss is also posting a steep loss on the day after Jefferies downgraded its rating on the company’s stock to Hold.
Engine maker Rolls-Royce Holdings has also slumped after S&P Global downgraded its credit rating to junk.
Meanwhile, AstraZeneca has moved to the upside. The drug maker said its Tagrisso lung-cancer drug “demonstrated unprecedented patient benefit” in a Phase III trial.
In economic news, German retail sales logged their largest fall since 2007 as most of the stores were closed amid the coronavirus pandemic, data from Destatis showed.
Retail sales turnover decreased 5.3 percent on a yearly basis in April, following a 4 percent drop in March. This was the biggest fall since January 2007 but slower than the expected decline of 12 percent.
The French economy contracted less than initially estimated in the first quarter but remained in a deep recession as the coronavirus pandemic weighed on spending, investment and exports, detailed results from the statistical office Insee showed.
Gross domestic product fell 5.3 percent sequentially instead of the 5.8 percent decline estimated initially, which was the biggest fall since the series began in 1949.
Eurozone inflation dropped to a four-year low of just 0.1 percent in May, the official Eurostat agency said.
Asia
Asian stocks ended mixed in cautious trading on Friday as the U.S.-China rift over Hong Kong clouded the outlook for en economic recovery and investors awaited the U.S. response to China’s passage of a national security law for Hong Kong.
Chinese shares rose after Premier Li Keqiang said the country has room to stimulate the economy. The benchmark Shanghai Composite Index inched up 6.13 points, or 0.2 percent, to 2,852.35, while Hong Kong’s Hang Seng Index ended down 171.29 points, or 0.7 percent, at 22,961.47.
Japanese shares ended lower to snap a four-day winning streak on concerns about worsening U.S.-China tensions over Beijing’s new security law that could dramatically erode the special administrative region’s autonomy. A raft of weak data also dented sentiment.
Japan’s industrial output fell to the lowest level in at least seven years in April and the country’s jobless rate hit its highest level in over two years, while retail sales slumped an annual 13.7 percent in the month, separate reports showed. The core consumer price index rose from the previous -0.1 percent to 0.2 percent.
The Nikkei 225 Index edged down 38.42 points, or 0.2 percent, to 21,877.89, while the broader Topix closed 0.9 percent lower at 1,563.67.
Nikon Corp. tumbled 9.1 percent after its full-year net profit plunged 88 percent from last year and the company said it cut 700 jobs in Southeast Asia as part of a restructuring of its digital camera business. Nissan Motor plummeted 10.8 percent after reporting a loss for the full year.
Australian markets fell notably as simmering tensions between the U.S. and China over Hong Kong tempered investor optimism about a re-opening of the world economy.
The benchmark S&P/ASX 200 Index tumbled 95.40 points, or 1.6 percent, to 5,755.70, while the broader All Ordinaries Index ended down 85.60 points, or 1.4 percent, at 5,872.20.
Westpac slumped 6.4 percent. The bank said that the chief executive of its institutional bank, Lyn Cobley, is retiring and a search is on for her replacement. The other three big banks fell 3-5 percent on profit taking after four days of strong gains.
Mining heavyweights as well as energy companies finished broadly lower. Gold miners Regis Resources, Evolution Mining and Northern Star Resources climbed 4-8 percent as gold prices ticked up amid a deepening U.S.-China rift.
Austal soared 10.2 percent after the shipbuilder raised its earnings and revenue outlook for fiscal 2020, citing continued strong performance across its business.
Private sector credit in Australia was flat month-on-month in April, the Reserve Bank of Australia said in a report – following the 1.1 percent increase in March. On a yearly basis, credit rose 3.6 percent – unchanged from the March reading.
Seoul stocks reversed early losses to finish marginally higher after South Korea’s finance minister pledged to take steps to stabilize the local currency markets. The benchmark Kospi gained 1.06 points, or 0.1 percent, to close at 2,029.60. Chipmaker SK Hynix lost 2.9 percent and internet portal giant Naver plunged 6 percent.
Industrial output in South Korea dropped a seasonally adjusted 6.0 percent sequentially in April, Statistics Korea said. That missed expectations for a decline of 3.2 percent following the 4.6 percent increase in March.
On a yearly basis, industrial production sank 4.5 percent – again missing forecasts for a fall of 2.2 percent after rising 7.1 percent in the previous month.
The total value of retail sales in South Korea was up a seasonally adjusted 5.3 percent month-on-month in April. That exceeded expectations for an increase of 1.5 percent following the 1.0 percent decline in March.
On a yearly basis, retail sales fell 2.2 percent – again beating forecasts for a fall of 5.0 percent following the 8.0 percent drop in the previous month.
Commodities
Crude oil futures are sliding $0.74 to $32.97 a barrel after climbing $0.90 to $33.71 a barrel on Thursday. Meanwhile, after rising $1.50 to $1,728.30 an ounce in the previous session, gold futures are jumping $18 to $1,746.30 an ounce.
On the currency front, the U.S. dollar is trading at 107.17 yen versus the 107.65 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1135 compared to yesterday’s $1.1077.
