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US open: Stocks on the mend as investors set aside trade concerns

By Iain Gilbert

Date: Wednesday 20 Jun 2018

US open: Stocks on the mend as investors set aside trade concerns

(Sharecast News) - Trading on Wall Street began on a positive note on Wednesday, with stocks recovering a tad from the heavy losses sustained over earlier sessions as investors appeared to set aside their worries about a trade war between the US and China - for now.
At 1530 BST, the Dow Jones Industrial Average was up 0.22% to 24,754.39, while the S&P 500 had gained 0.32% to 2,771.42 and the Nasdaq moved ahead 0.67% to 7,777.16.

Connor Campbell, a financial analyst at SpreadEx, said, "The market's rebound waned as Wednesday went on, investors struggling to find a reason to keep the gains going into the afternoon."

"The Dow Jones, which at one point looked like it was going to reclaim 150 points, ended up starting the US session flat, the wrong side of 24700. There was little for the index to really work with on Wednesday, beyond the ever-looming threat of a full-blown trade war between the world's two largest economies," Campbell added.

Stocks ended in the red on Tuesday as tensions between the US and China escalated after President Trump said his administration was considering hitting China with further tariffs on $200bn-worth of imported goods if it retaliated for earlier moves from Washington.

Fiona Cincotta, senior market analyst at City Index, said: "The Sino-US conflict is not likely to fade into the background any time soon but now that some strong blows have been exchanged it will take some time for the effects and the real cost to be felt by businesses."

Meanwhile, Lukman Otunuga, research analyst at FXTM, said the sustainability of risk appetite should be questioned as fears over trade tensions remain a key market theme.

"Global equity bears could transform the current rebound into a classical dead cat bounce if trade tensions between the United States and China continue to escalate."

Berenberg analyst Holger Schmieding said the chances of a deal between the US and China may well be better than the current noise suggests.

"China probably knows that, as the weaker and less developed partner who needs access to the US market and US technology for the sake of its long-term development plans, it needs to appease Trump somewhat.

"However, striking a deal between the US and the EU could be more difficult. On matters of trade, the EU sees itself as a power on par with the US. That does not seem to register with Washington, which sees the EU as a bunch of smaller nations which can be bullied individually (hence the misguided US focus on the 'German' angle in the trade dispute)."

In corporate news, shares in Winnebago shot up 10.02% at the open following the release of its third-quarter earnings, while those of Starbucks sunk 5.60% after cutting its third-quarter sales forecasts on Tuesday. The company said it is planning on ramping up the number of store closures next year.

Elsewhere, Oracle Corp lost 5.38% after its earnings beat but guidance was weak, while General Electric fell 1.16% after S&P Dow Jones Indices said it would replace the company with Walgreens Boots Alliance - up 3.34%.

AT&T dipped just 0.11% following a report that it was in talks to buy advertising technology group AppNexus.

On the data front, the US current account deficit grew to $124.1bn in the first quarter, from a revised figure of $116.1bn in the fourth quarter of 2017, according to the Bureau of Economic Analysis.

Economists had been expecting a deficit of $129bn.

The deficit was 2.5% of current-dollar gross domestic product in the first quarter, up from 2.4% in the fourth quarter.

Also on the data front, sales of previously owned US homes unexpectedly dropped in May as a lack of inventory and higher asking prices weighed on demand, according to the National Association of Realtors.

Contract closings fell 0.4% month-on-month to an annual rate of 5.43m, short of estimates of a 5.52m figure and median prices increased 4.9% year-on-year to a record $264,800.

Meanwhile, as part of his prepared remarks before a central banking conference in Portugal, Federal Reserve chairman Jerome Powell cautioned central banks against running an excessively hot labour market in case it undermines their credibility on low and stable inflation.

"With the economy strong and risks to the outlook balanced, the case for continued gradual increases [...] remains strong," Powell said in Sintra.

Powell added that unemployment appeared set for a further drop but with wage growth remaining somewhat moderate, "the labour market is not excessively tight".

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