U.S. consumer sentiment in July was revised higher, despite a noted acceleration in concerns over tariffs, according to a report released on Friday.

StockMarketNews.Today
2018/07/27

Stock Market News Today:

U.S. Consumer Sentiment Revised Higher Despite Acceleration in Tariff Concerns. 

The current conditions indicator increased to 114.4 in July, from the previous reading of 113.9. Economists had projected that the index would rise to just 114.0.Additionally, consumer expectations unexpectedly increased to 87.3 in July, from the previous 86.4. That beat consensus that had expected a rise to just 86.5. Meanwhile, inflation expectations for the next 12 months and the five-year gauge went unrevised at 2.9% and 2.4%, respectively.

The surveyor considered the 0.3 point decline in the headline number from June to be “trivial.”

“Despite the expectation of higher inflation and higher interest rates during the year ahead, consumers have kept their confidence at high levels due to favorable job and income prospects,” the survey’s chief economist Richard Curtin explained.

Americans’ worries over tariffs accelerated.

However, this expert highlighted that concerns about tariffs greatly accelerated in the July survey. “Across all households, 35% spontaneously mentioned that the tariffs would have a negative economic impact in July, up from 21% in June and 15% in May,” the data showed.

“Of course, these negative economic expectations could quickly disappear if the trade issues with Europe are promptly settled and immediately followed by agreements with China, Canada, and Mexico,” Curtin said.

“Resolution is critical to forestall decreases in consumer discretionary spending as a precaution against a worsening economy,” he concluded.

Faang group. 

The latest earnings reports for members of the Faang group of tech giants — Facebook, Amazon, Apple, Netflix and Google — are making what has been a winning trade for investors look more complex. Amazon blew past Wall Street forecasts on Thursday as its diversification into higher-margin cloud computing and the dominance of its online retail business produced the first $2bn quarterly profit in its history.

The second-quarter results were a bright spot in an otherwise gloomy week for the technology sector, coming a day after Facebook stunned investors with a prediction of slowing growth, sending its shares down nearly 20 per cent and wiping more than $120bn from its market capitalisation.

Amazon, which only crossed the $1bn mark for quarterly profit at the end of last year, reported $2.5bn in net income in the quarter ending in June. The company’s shares surged 4 per cent in after-hours trading despite revenue missing analysts’ expectations.

Mueller eyes Trump tweets.

Donald Trump has used Twitter as a key public relations weapon, but the president’s attacks on senior officials including the attorney-general and the FBI director are now being scrutinised by special counsel Robert Mueller as potential obstructions to his investigation.

China’s blocking of chip merger changes M&A landscape.

Beijing’s decision to not allow the Qualcomm-NXP merger killed what would have been a transformative deal for Qualcomm and threatens to change the mergers and acquisitions landscape for US technology companies. (FT)

US GDP boost.

New data on Friday are expected to show renewed momentum in consumer spending, growth in capital expenditures and a net boost from trade. The top economic adviser to the president said the figures would be “big”. Economists predict GDP expanded at a 4.2 per cent annualised rate, compared with a 2 per cent increase at the start of the year.

China is turning to the EU to form a united front against Donald Trump’s trade policies.

 

Before that summit, Chinese premier Li Keqiang is due to meet German Chancellor Angela Merkel in Berlin before returning to Beijing to host the EU delegation. In a summit with central and eastern European leaders in Bulgaria this weekend, Mr Li said China would continue to widen access for foreign investors.

The US imposed tariffs on $34bn in Chinese goods on Friday — a move that China promptly matched with tariffs of its own. President Donald Trump has upped the ante by threatening tariffs on $500bn in trade, equivalent to all the goods the US imports from China, as he attempts to force manufacturing back within America’s borders.

By contrast, China and the EU are expected to exchange market access offers on foreign investment at the summit meeting, after several years in which Europe’s attempts to negotiate a bilateral treaty took a back seat to Beijing’s talks with Washington.

Brussels and Beijing began discussions on an investment treaty in 2013, with frequent complaints from the European side that China was dragging out negotiations and showing no serious willingness to open up its market. The lack of progress even as Chinese investment flooded into Europe was one of the factors behind EU proposals last year for the bloc to equip itself with a more rigorous system for screening foreign investments.

European companies are now being groomed by Beijing as the first beneficiaries of reforms rolled out earlier this year, including steps to reduce or remove ownership caps on security groups and other financial services businesses.

Trade tensions between Washington and its major trading partners are rising, as Mr Trump moves to shield core national manufacturing sectors from what he sees as unfair foreign competition. The EU has already hit €2.8bn of US products with retaliatory tariffs in response to Mr Trump’s restrictions on steel and aluminium imports, and is drawing up an €18bn hit list in response to the US president’s threat to target the auto sector.

But EU officials said that Brussels was determined not to be drawn into any situation that could look like it was teaming up with China against the US on trade policy. They pointed out that European capitals share core Trump administration concerns about the pressure and restrictions Beijing applies to foreign companies, notably when it comes to forced technology transfer, as well as Washington’s anxieties about the activities of Chinese state-owned enterprises.

Negotiators in Brussels underline that they are still far from a deal on the investment treaty, despite recent progress.

Ms Merkel has given public backing to the idea, amid concerns that the US could apply punitive duties against its car exports as early as September. China, for its part, has already lowered tariffs on imported cars, as part of a series of liberalising reforms rolled out as talk of a trade war heated up this spring, before raising them on American cars as part of the recent round of tariffs.

The EU is also pushing for Chinese recognition of the EU’s “Geographical Indications” that protect local specialities such as Roquefort cheese and champagne from imitation.

Tu Xinquan, a trade expert at the University of International Business and Economics in Beijing, said that despite their differences, the EU and China’s shared irritations with Mr Trump should be apparent at the summit and in the coming weeks.

China’s stock market remains under pressure and European stocks are drifting as investors continue to watch for signs that the trade dispute between China and the US could be influencing China’s policy on its currency.

The CSI 300 index of major stocks in Shanghai and Shenzhen ended 1.3 per cent lower after a volatile run during the session. The index, which touched a one-year low is down more than 20 per cent from its highest point this year, touched in late January.

London’s FTSE 100 is down 0.2 per cent, while Frankfurt’s Xetra Dax 30 is down 0.3 per cent. The Europe-wide Stoxx 600 is up 0.1 per cent. The Stoxx index tracking technology stocks is down 0.9 per cent after falls for the sector in the US overnight.

With Wall Street markets closed for the Independence Day holiday, trading volumes are likely to be thinner throughout the session.

After China’s central bank appeared to intervene to arrest a steep decline in the renminbi the previous day, the onshore version of the currency is stronger again, by 0.4 per cent at Rmb6.6106 per dollar. That keeps it off its weak point of Rmb6.7168 hit on Tuesday — its lowest point since August 2017 — amid fears that China’s economy is slowing at a time when the trade dispute poses a threat.

The turnround came as a result of what traders said was Chinese state banks aggressively selling dollars to support the renminbi, and after People’s Bank of China governor Yi Gang sought to calm markets, attributing renminbi weakness to a strong dollar and “some pro-cyclical behaviour”.

Hong Kong’s Hang Seng fell 1.1 per cent, while Tokyo’s Topix was flat for a second consecutive session.

On Wall Street overnight, tech stocks suffered broad weakness, with Facebook falling 2.3 per cent, hurt by fresh concerns over data breaches. The S&P 500 closed down 0.5 per cent and the tech-heavy Nasdaq shed 0.9 per cent.

Forex:
The euro is up 0.2 per cent at $1.1672, as the dollar looks tired after its sustained gains over the year to date. The index tracking the dollar against six other currencies is down 0.3 per cent on the session, taking its 2018 advance to just under 2.5 per cent.

Sterling turned positive for the session — up 0.1 per cent at $1.3205 — after robust data from the UK’s dominant services sector. The purchasing managers’ index (PMI) for June hit its highest level since October 2017. Before the data came out, it was down 0.2 per cent.

“The services PMI broadly confirms that the weakness in the first quarter of the year looks to have been an anomaly.

“We will learn more about the health of the economy next week as hard data for the second quarter emerges — commencing with the first release of monthly GDP. Our expectation is that the data will not be strong enough to encourage the Bank to hike as soon as August.”

Commodities:
Brent crude is up 0.2 per cent to $77.94 a barrel. Gold is 0.6 per cent firmer at $1,260 an ounce.

Top Stock Market News: The decline in China’s currency and the recent bout of pressure on its stock markets continue to set a cautious tone to trade, but US and European indices are rising, helped by supportive political developments closer to home.

Sentiment remains exposed to rhetoric on global trade and the wider implications of a slide into a deeper tit-for-tat dispute, with concern that China may be allowing its currency to weaken as a tactic in the stand-off with the US.

The offshore renminbi weakened past Rmb6.7 per dollar for the first time in close to a year — one of its steepest intraday falls on record — before the central bank appeared to intervene to stabilise the market.

In a statement posted on the People’s Bank of China’s website on Tuesday afternoon, governor Yi Gang sought to calm markets, attributing renminbi weakness to the strong dollar and “some pro-cyclical behaviour”.

Hong Kong stocks suffered a steep fall as traders returned from Monday’s market holiday, while wider Asian equities were broadly lower.

The Hang Seng closed down 1.4 per cent in Hong Kong, off steeper intraday lows that took it down around 3 per cent.

Stock benchmarks on China’s mainland followed a similar path. The CSI 300 index of major Shanghai and Shenzhen-listed companies closed on the flatline, having been down as much as 2.6 per cent and after ending Monday’s trade with a 2.9 per cent fall.

Equities:
London’s FTSE 100 is up 0.8 per cent, while the Paris CAC 40 is 0.9 per cent higher. The Europe-wide Stoxx 600 is also up 0.9 per cent.

Banking stocks are finding more support, with the Stoxx index tracking the sector in Europe up 0.7 per cent and the equivalent benchmark for carmakers climbing 1.2 per cent.

Tokyo’s Topix ended down 0.5 per cent, losing momentum after initial gains.

Forex and fixed income:
There is a broader trend for the dollar to head away from some of its highest levels of the year, with the index tracking it down 0.4 per cent at 94.64.

Sterling is up 0.2 per cent at $1.3170, taking it off some of its weakest levels of the year, after robust economic data from the construction sector.

Turkey’s lira has taken a hit from a sharp jump in inflation, weakening it by 1.3 per cent to TL4.6720 per dollar.

Japan’s yen is 0.1 per cent firmer at ¥110.61 per dollar.

In the US, the yield gap between the two-year and 10-year Treasury fell below 30 basis points for the first time since 2007 as the 10-year fell 3bp to 2.84 per cent and the two-year yield fell 1bp to 2.54 per cent.

Commodities:
Oil prices are climbing after dropping overnight, with international benchmark Brent crude up 0.8 per cent at $77.89 a barrel.

S West Texas Intermediate rose as high as $75.27 — its first break above $75 since 2014 — before going into reverse to trade 0.6 per cent lower at $73.49.