US-China Trade Ties: A Rollercoaster Journey - Tech Stocks Traverse Uncertainty
Decision on Initiation of Procedure Still Pending by the Commission
Despite impending trade discussions, Wall Street maintains its investing spree, with tech stocks garnering significant attention.
In the face of lingering uncertainties, Wall Street displayed growth on Tuesday, propelled by tech stocks. The Nasdaq Composite manages to inch back into the positive for the year. The recent tariff announcements from President Donald Trump stirred minimal concerns. Yet, the question lingers: Will the USA and China forge a final trade pact? Both parties traded accusations of undermining previous arrangements the day prior. Meanwhile, the Trump administration has encouraged its trading partners to submit proposals for trade negotiations within five weeks.
Michael Brown, a market strategist at Pepperstone, contends, "The jury is still out on how this will all play out, but at least with the China question, it seems like a call at the highest level might be necessary to break the impasse. Some in the Trump administration have suggested that such a call could come this week."
White House spokeswoman Karoline Leavitt confirmed that US President Trump and Chinese President Xi Jinping will have a phone conversation "very soon," albeit without specifying the exact date.
The Dow Jones Index ascended 0.5 percent to 42,520 points, while the S&P 500 closed 0.6 percent higher. The Nasdaq Composite climbed 0.8 percent. Preliminary data from the NYSE revealed 1,916 (Monday: 1,271) advancers and 853 (1,493) decliners, with 62 (80) issues remaining unchanged.
Economic Prospects: Daunting Outlook
New forecasts from the Organisation for Economic Co-operation and Development (OECD) shed light on the trade dispute's adverse impact on financial projections. The OECD has revised its projections for global economic growth this year and next, citing increased trade barriers and lingering uncertainties. Notably, the USA is hardest hit by these circumstances, mirroring China's sluggish economic data.
In the USA, industrial orders dropped more sharply than anticipated in April. The number of job openings in the USA experienced a slight boost in April.
On the bond market, yields displayed minimal change, recuperating from initial slight losses. The yield on ten-year US Treasury notes remained relatively static at 4.46 percent. UBS anticipates increasing yields and thus falling US yields due to growth risks. Analysts, however, do not expect the yield to dip below the 4 percent threshold for the ten-year period in the upcoming months.
Politics: Musk's Outburst Against Trump's Budget Proposal
After hitting a six-week low, the dollar strengthened substantially, with the dollar index rising 0.6 percent. The Greenback was also bolstered by euro weakness. Although a rate cut is anticipated from the ECB on Thursday, new inflation data could intensify expectations for another rate cut subsequently, according to traders.
A Shifting Landscape for Gold and Oil
The dollar's might impacted the gold price, as the troy ounce dipped by 0.8 percent to $3,353 after a significant boost the prior day. Nevertheless, the precious metal continues to hover near its recent multi-week highs. The ongoing trade dispute persistently drives demand for gold as a safe haven.
Conversely, oil prices continued to ascend, with quotes for Brent and WTI increasing by up to 0.9 percent. Pessimistic expectations for a ceasefire in Ukraine precluded additional Russian supply, and the US Congress is preparing new Russia sanctions targeting the oil sector.
Tech Stocks Retain Their Allure
Tech sector stocks remained popular. Nvidia shares escalated by 2.8 percent, and Super Micro Computer gained 4.8 percent. Micron Technology improved by 4.2 percent, following its announcement of distributing the first sample of a new chip developed for AI applications in smartphones.
Walt Disney garnered a 0.6 percent increase. The entertainment conglomerate plans to lay off hundreds of employees worldwide across various departments to streamline operations. Dollar General surged by 15.9 percent, as the retailer revised its outlook. MoonLake Immunotherapeutics climbed 18 percent, following reports of potential takeover talks with Merck & Co (+1.2%).
Sources: ntv.de, toh/DJ
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US-China Trade Relations: A Historical Overview
Key Milestones in US-China Trade Relations
- 2018: Initiation of trade talks under President Trump, leading to the imposition of tariffs on Chinese goods.
- 2019: Adjustments and extensions to previous tariffs, with continued back-and-forth negotiations.
- 2020: The Phase One Trade Agreement was signed, outlining tariff reductions and commitments to increase American exports to China.
- 2021: Mutual accusations of trump card tactics by both nations, creating uncertainty in the trade landscape.
- 2022: The initial agreement was extended, evident in the continual leveling out of trade tensions, marking a temporarily stable phase in US-China trade relations.
- 2023-2024: Anticipated negotiations for a permanent agreement to replace the temporary one signed in 2022.
The Commission is closely monitoring the ongoing US-China trade talks, focusing on the potential impact on tech businesses and finance. TheOrganisation for Economic Co-operation and Development (OECD) warns that the trade dispute is negatively affecting global economic growth projections, particularly in the USA. Michael Brown, a market strategist at Pepperstone, suggests that a high-level call might be necessary to resolve the trade impasse. In the meantime, tech stocks continue to attract investors, with companies like Nvidia and Super Micro Computer experiencing gains. Despite trade uncertainties, the general-news landscape is also influenced by events in politics, business, and technology, where notable occurrences include Elon Musk's outburst against Trump's budget proposal and the shifting landscape for gold and oil markets.
