05/07/2018 – Argonaut Morning Note

Market Update & Important Indicators:

Concerns that disputes between the U.S. and China would hit the technology sector continued to weigh down stocks. Markets in Asia mostly closed lower, while the Stoxx Europe 600 was flat in afternoon trading despite big gains in telecom companies. Tech stocks were the worst performers in Europe, with the sector dropping 1.5%. This echoed what happened in U.S. markets on Tuesday, when shares of technology companies led the broader S&P 500 to close down 0.5%. U.S. markets were closed Wednesday for the July Fourth holiday. One of the firms leading the losses in Europe on Wednesday was Siltronic, a German semiconductor manufacturer that generates 30% of its revenue from China, according to data provider FactSet. Its shares were down almost 8%. The US gold price gained 0.3% to 1,256 US$/oz.

The Stoxx Europe closed up 0.1% at 380.05, with equity trading muted due to trade tensions and as U.S. markets closed for Independence Day. Trade concerns hurt German stocks, with the DAX index ending down 0.3%, while the U.K.'s FTSE 100 also closed down 0.3% as heavyweight mining stocks fell, mirroring a drop-in base-metal prices. France's CAC 40 ended just in the green, up 0.1%, while Spain's Ibex was up 1%. But Italy's FTSE MIB finished down 0.4%. 

Stock markets in Asia edged down, as spats between the U.S. and China related to trade and technology firms continue to dampen investors' mood. Hong Kong's Hang Seng was down 1.1% and the Shanghai Composite shed 1%. Japan's Nikkei Stock Average closed down 0.3%. So far, Asian and European stock markets have been the hardest-hit by the U.S. administration's move toward greater protectionism. This adds to signs that the pace of economic growth may have already peaked outside of the U.S., leading investors to push further back the time at which they expect other central banks to follow the Federal Reserve's path and start tightening monetary policy.

Morning weakness in Australian stocks wasn't reversed in the afternoon, resulting in the S&P/ASX 200 giving up most of its rebound from Wednesday amid another day of broad Asia Pacific selling outside of Southeast Asia. The index, now down seven of the past nine sessions, fell 0.4% to 6183.4 with broad declines. Utilities and telecom were the only sectors higher, the latter helped by Telstra rebounding for a third day. Meanwhile, the heavily weighted bank sector was soft. IG said the ASX 200's break below support at 6190 opens the prospect of a further drop to 6140.

Base metal prices were again mostly down on the London Metal Exchange. The largest falls were seen in zinc, falling 3.2%, and lead falling 2.8%. Falls were also reported in the 3-month copper contract that slipped 1.5% to finish at 6,388/t, and nickel that lost 2.1% to trade at 14,054/t. Aluminium had a positive day, posting a 0.9% gain to close at 2,115/t