Friday August 9th

9-08-2019

Dow set to drop 100 points on renewed trade war fears, chip stocks lead decline on Huawei report

U.S. stock index futures fell on Friday as investors braced for another wild day amid lingering trade war fears. At around 8:37 a.m. ET, Dow Jones Industrial Average futures fell 130 points, indicating a drop of 110 points at the open. Futures on the S&P 500 and Nasdaq were also lower. Overnight, Bloomberg reported that the U.S. is holding off on giving permission to U.S. companies to use Huawei products, citing people familiar with the matter. This comes after China decided to stop buying American crops and after the U.S. officially declared China a currency manipulator earlier this week. Chip stocks fell on the news. Micron Technology and Advanced Micro Devices both traded more than 1% lower in the premarket while Skyworks Solutions slipped 0.7%. Stocks have had a volatile week, with the major indexes recording their biggest one-day sell-off of the year on Monday. The indexes recovered some of those losses on Tuesday. On Wednesday, stocks resumed their sell-off as investors loaded up on traditionally safer government bonds and gold  before staging a sharp comeback. By Thursday’s close, the indexes had recovered most of their losses from Monday’s drop. Still, traders are also keeping a close eye on the bond market, where the recent appetite for U.S. debt has pushed a bond market recession indicator close to a warning zone. If investors trigger a recession warning in the bond market that tends to be negative for stocks. In Europe, bank stocks led markets lower Friday morning as Italian lenders tumbled on political uncertainty in the country. Italy’s coalition government imploded on Thursday evening, as deputy prime minister and leader of Italy’s ruling Lega party, Matteo Salvini, declared the arrangement unworkable and called for fresh general elections. The wholesale cost of U.S. goods and services rose modestly in July, but inflation more broadly appeared dead in the water and showed little sign it’s about to speed up. The producer price index increased 0.2% last month, matching the forecast of economists polled by MarketWatch. Yet the pace of wholesale inflation over the past year was flat 1.7%. And more closely followed measure that strips out volatile food, energy and trade-margin costs fell for the first time in almost four years. The so-called core PPI dipped 0.1%. Stocks in Asia Pacific traded mixed on Friday, as Chinese data showed food inflation soared in July while Japan’s economy grew at a greater pace than expected. Mainland Chinese stocks closed lower, retracing earlier gains. The Shanghai composite slipped 0.71% to about 2,774.75 and the Shenzhen component declined 1.39% to 8,795.18. The Shenzhen composite fell 1.274% to approximately 1,479.86. Hong Kong’s Hang Seng index slipped 0.4%, as of its final hour of trading. In other parts of the region, markets advanced. Japan’s Nikkei 225 gained 0.44% to close at 20,684.82 while the Topix index rose 0.35% to 1,503.84. South Korea’s Kospi advanced 0.89% to close at 1,937.75. Oil prices rose on Friday supported by expectations of more OPEC production cuts despite the International Energy Agency (IEA) reporting demand growth at its lowest level since the financial crisis of 2008. Brent crude futures were at $58.07 a barrel, up 69 cents, or 1.2% from their previous settlement. West Texas Intermediate (WTI) futures were at $53.14 per barrel, up 59 cents, or 1.1%. Gold was on course for its biggest weekly gain in more than three years on Friday as it held above $1,500 an ounce on heightened trade tensions between Washington and Beijing. Spot gold was up 0.2% at $1,502.57 per ounce after it surpassed $1,500 for the first since April 2013 earlier this week. Bullion has risen 4.3% so far this week, and about 17% for the year, gaining more than $100 in the past week. U.S. gold futures rose 0.3% to $1,514.30 an ounce.