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Apr 6, 2018

Asia, Europe and U.S. Stock Markets Report on April 6, 2018


US-China trade tensions, currencies and stocks in focus

Cheang Ming

Asian stocks closed mixed on Friday, as the overnight rally on Wall Street failed to translate after President Donald Trump indicated that more tariffs against China could be in the works.
Still, losses in the region were slighter compared to the sell-offs on the back of trade news last month. MSCI's index of shares in Asia Pacific excluding Japan were roughly flat at 3:15 p.m. HK/SIN.
Trump said late on Thursday during U.S. hours that he has told U.S. trade officials to consider $100 billion in extra tariffs against China. The president added that the move would be appropriate given China's "unfair retaliation," although he left the door open for negotiation.

-77.90 -0.36%
HSI HSI 29844.94
326.25 1.11%
ASX 200 S&P/ASX 200 5788.70
-0.10 0%
SHANGHAI Shanghai 3131.84
-4.79 -0.15%
KOSPI KOSPI Index 2429.58
-7.94 -0.33%
CNBC 100 CNBC 100 ASIA IDX 8484.62
-12.22 -0.14%
U.S. Trade Representative Robert Lighthizer said those additional tariffs would not be implemented until a public comment process was concluded.
In response, China's commerce ministry said that it would fight back should the U.S. move forward with protectionist trade measures, Xinhua reported.
Japan's Nikkei 225 slipped 0.36 percent, or 77.9 points, to close at 21,567.52 amid choppy trade. Despite the move lower amid elevated trade tensions, the benchmark finished the week higher by around 0.5 percent.
The broader Topix finished off by 0.31 percent, with the real estate and shipping sectors among the worst-performing.
Meanwhile, South Korea's Kospi slipped 0.33 percent to end at 2,429.58, paring steeper declines seen earlier in the session.
Over in Australia, the S&P/ASX 200 closed flat at 5,788.70, with gains in the materials and energy subindexes offset by declines in heavily weighted financials.
Hong Kong's Hang Seng Index rose 1.09 percent by 3:00 p.m. HK/SIN, shrugging off jitters seen in the rest of the region as markets returned from a one-day holiday. The heavily weighted financials sector traded in positive territory and index heavyweight Tencent advanced 1.96 percent an hour ahead of the market close.
Meanwhile, U.S. stock index futures tumbled following the latest trade-related development, with Dow Jones industrial average futures last lower by around 200 points. S&P 500 and Nasdaq futures also came under pressure during Asia hours.
Earlier, U.S. and European markets had advanced in the last session as trade fears among investors eased in the last session. The Dow rose nearly 1 percent and the pan-European Stoxx 600 surged 2.4 percent on Thursday.
Markets in mainland China, Taiwan and Thailand were closed on Friday.

Trade tensions back in focus

Investor concerns over recent U.S.-China trade rhetoric have been in focus in the past month. Markets have been on edge over trade tensions potentially triggering a trade war between the two largest economies in the world.
"Capricious policies make for volatile markets," Jack Ablin, chief investment officer of Cresset Wealth Advisors, said regarding Trump's latest statement on tariffs.
China on Wednesday unveiled plans for additional tariffs on 106 U.S. products. That came after the Trump administration released of its list of Chinese imports that could be targeted with proposed tariffs.
Although Trump's Thursday announcement raised concerns that there could be more uncertainty ahead, some in the markets indicated that the move could also be part of Trump's negotiation tactics.
The safe-haven yen pared the gains it made following the latest trade comments from Trump. Against the yen, the dollar traded at 107.38 by 2:45 p.m. HK/SIN, trading at levels seen before the statement.
The dollar had touched its highest levels against the yen in three weeks in the overnight session amid improved investor confidence on Thursday.
"Markets are digesting the fact that most of the tough trade tariff talk is unlikely to result in action that will upset global growth or even come to fruition," Richard Grace, chief currency strategist and head of international economics at Commonwealth Bank of Australia, said in a morning note regarding the dollar's overnight move higher.
The dollar index, which tracks the U.S. currency against six peers, firmed slightly to trade at 90.469.
Besides concerns related to the possibility of a trade war, investors also awaited the release of U.S. March nonfarm payrolls due during U.S. hours. Economists estimated around 193,000 jobs were likely added last month, according to a Reuters poll.
In corporate news, Samsung Electronics said its first-quarter operating profit was expected to climb 57.6 percent compared to one year ago, Reuters said. The forecast profit of 15.6 trillion won ($14.7 billion) was above a Thomson Reuters estimate of 14.5 trillion won. Samsung stock was down 0.7 percent.
Meanwhile, shares of Takeda Pharmaceutical tumbled 5.03 percent. The decline came on the back of comments from its CEO, who made the case for buying London-listed drugmaker Shire at a Thursday briefing, Reuters reported.
— CNBC's Patti Domm contributed to this report.


European stocks close lower amid escalating trade tensions

Sam Meredith, Ryan Browne

European equities closed lower Friday, as an escalating trade standoff between the world's biggest economies rattled investors.

FTSE FTSE 7183.64
-15.86 -0.22% 676546933
DAX DAX 12241.27
-63.92 -0.52% 89700115
CAC CAC 5258.24
-18.43 -0.35% 70983857
IBEX 35 --- --- --- --- --- ---
The pan-European Stoxx 600 closed down by 0.35 percent provisionally, with most major bourses and sectors finishing in negative territory.
Europe's auto stocks led the losses on Friday, down almost 1.7 percent amid heightened trade tensions. Schaeffler and Hella were among the worst sectoral performers, down 1.33 and 1.57 percent respectively.
Basic resources stocks — with their heavy exposure to China — were among the worst performers, down 1.6 percent. Rio Tinto was among the hardest hit after Exane BNP Paribas cut its stock recommendation to a "neutral" from "outperform." Shares of the mining giant were off more than 2.3 percent on the news.
Looking at individual stocks, Telecom Italia surged to the top of the European benchmark. On Thursday, Reuters reported, citing three unnamed sources, that Italian state lender CDP intends to buy a stake of up to 5 percent in the firm. Shares of Telecom Italia shot up by almost 7 percent.
Dufry was among the top performing European stocks, after the firm proposed a dividend and announced it would launch a share buyback plan. Kepler Chevreux then upgraded its target price for the Swiss travel retailer shortly after the opening bell, supporting a move higher. Shares of Dufry were up 3 percent.

Trade showdown

On Wall Street, stocks traded lower amid ongoing protectionism worries. U.S. nonfarm payrolls rose 103,000 in March, well below analyst expectations.
Late on Thursday, President Donald Trump instructed the U.S. Trade Representative to consider $100 billion of additional tariffs on Chinese goods. The further charges were being proposed "in light of China's unfair retaliation" against prior U.S. trade actions, Trump said in a statement.


Dow plunges more than 500 points as trade war fears rattle Wall Street

Fred Imbert, Alexandra Gibbs

Stocks fell sharply on Friday as worries of a trade war brewing between the U.S. and China grew. Wall Street also digested disappointing employment data.
The Dow Jones industrial average fell 593 points, with Boeing and Caterpillar as the biggest decliners in the index. The S&P 500 declined more than 2 percent, with industrials as the worst-performing sector. The Nasdaq composite dropped 2.2 percent.
The sell-off accelerated in the final two hours of trading after Fed Chief Jerome Powell indicated the central bank would continue hiking rates this year. Some traders were hoping the Fed Chief would acknowledge the recent market volatility caused by the trade dispute.
"This is truly a reaction to China," said JJ Kinahan, chief market strategist at TD Ameritrade. "What we've seen with this administration is a trend of a big statement, followed by everyone getting riled up, and then a pragmatic solution is found."
"Cooler heads may prevail moving forward," Kinahan said.
Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., February 5, 2018. Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., February 5, 2018.
After China announced fresh tariffs on 106 U.S. products Wednesday, President Donald Trump threatened more levies Thursday evening, stating that he has asked the United States Trade Representative to consider $100 billion in additional tariffs against China.
U.S. stock futures plunged overnight on the news, while global stock markets fell. China's Commerce Ministry said Friday the country will not hesitate to react with a "major response" to the new tariffs from the U.S.
Trump later tweeted on Friday: "China, which is a great economic power, is considered a Developing Nation within the World Trade Organization. They therefore get tremendous perks and advantages, especially over the U.S. Does anybody think this is fair. We were badly represented. The WTO is unfair to U.S."

Boeing and Caterpillar, two companies that could be adversely affected by a trade war with China, both fell more than 3.5 percent.
Shares of large-cap tech companies also fell. Apple and Amazon both declined more than 2 percent, while Netflix dropped 2.2 percent after briefly trading higher.
Stocks briefly came off their lows in midday trading after an official from Mexico's economic ministry said the person was "very convinced" a new deal on NAFTA will be reached soon.
But the major indexes resumed their decline after Treasury Secretary Steven Mnuchin said there was a possibility of a trade war with China.
"If this leads to more tariffs that's going to be hurtful to the economy," said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
The move lower in stocks also follows the release of much weaker-than-expected jobs data. The Labor Department reported the U.S. economy added 103,000 jobs in March. Economists polled by Reuters expected a gain of 193,000.
"I'd call this one a mixed bag. The headline number may disappoint but there's more than meets the eye," said Mike Loewengart, vice president of investment strategy at E-Trade, noting that wages improved and unemployment remains at historically low levels.
"For investors, today's report may be a tough one to swallow when coupled with a trade standoff that seems to be intensifying with each passing day," Loewengart said.
  • Wall Street extends rebound rally Dow rises almost 300 points as energy and tech lead.
  • Bargain hunting for retail stocks Mark Tepper of Strategic Wealth Partners and Boris Schlossberg of BK Asset Management discuss retail names with Michelle Caruso-Cabrera.
  • Dimon called for 4% on the 10-year. Here’s why it won’t happen Boris Schlossberg of BK Asset Management and Mark Tepper of Strategic Wealth Partners discuss Jamie Dimon’s annual shareholder letter with Michelle Caruso-Cabrera.
  • A mass rally held at Kim Il-sung Square in Pyongyang, North Korea, on August 9, 2017. Gina Sanchez of Chantico Global says a North Korean attack, should one occur, isn't likely to cause significant long-term market impact.
  • Boris Schlossberg of BK Asset Management says the ISM non-manufacturing report is key to watch ahead the jobs data released Friday.
  • When the dollar is weak, here's the sector that wins Chad Morganlander of Washington Crossing Advisors is watching the dollar this week and expects it'll begin to strengthen heading into the second half of the year.
  • Stacey Gilbert Stacey Gilbert is the head of derivative strategy at Susquehanna.
  • Managing Director, ACG Analytics
  • Rich Ross Managing Director, Head of Technical Analysis, Evercore ISI


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