S&P recovering after Huawei temporal permission and traders preparing themselves for a busy Wednesday

Published date: 21/05/2019
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After a tense start of the week, a new ceasefire is now impacting S&P positively. SPX is up 0.86%. Markets are recovering after Huawei was granted with temporal permission by The US Commerce Department. Until August 2019, the Chinese multinational will be able to purchase US goods.

This “peace treaty” came after the negative and turbulent reaction of Asian and European markets in response to Huawei blacklisting. At the moment, Wall Street is slightly and slowly recovering from Monday’s losses, headed by tech stocks showing investors’ sentiment about the consequences of the prohibition. Chip stock ETFs, chipmakers, semiconductors, video game publishers and telecommunications businesses were the first ones to be hurt. Companies such as Xilinx (XLNX), Intel (INTC), Qualcomm (QMUN), Micron Technology(MU) and Broadcom (AVGO) are key providers for Huawei, with a significant percentage of their earnings linked to China.  

On the opposite, some Chinese shares experienced a positive shock, as Huawei will be requiring domestic suppliers. Changing the production chain will involve the replacement of its main American suppliers, Qualcomm and Intel.

All in all, the recent chaos has also pushed the greenback higher to new week highs, but near to important supply levels. Asian currencies are still in pain. Trade tensions will certainly keep hurting economic growth in countries such as Thailand, Singapore, and Australia.

On the European scope, today traders were expecting to hear signs of further slower growth momentum in Luis de Guindos speech and disclosures of the future role of the euro.

The starling has recently gained momentum with GBP/CHF, GBP/CAD, GBP/AUD, GBP/JPY and GBP/USD bouncing around meaningful levels. Inflation readings have been rescheduled for tomorrow and it may shift the selling pressure of the pound significantly. Unfortunately, is believed that positive change in the price will not last as a new deal will be presented by Britain’s Prime Minister, and no further consensus seems to be near. On top of that, the Organisation for Economic Co-operation and Development has already counselled BoE about the impacts of raising rates during Brexit scepticism.

Additionally, the UK industrial panorama has been hit again by news of a possible collapse of the second largest steel producer, British Steel. The steel industry is a key component affecting manufacturing earnings, and bankruptcy of this magnitude can severely impact future quarterly reports.

Lastly but certainly not least, Turkey is the main character on Eastern Europe headlines, with the Central Bank lightening tight policies. From 25.5% to 24% is the newest rate of lira swap transactions. Nonetheless, investors are convinced that the recent decision is heavily linked with the objective of protecting the Lira before the coming elections.

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