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Investors May Shrug Off Escalation Of US/China Trade War

By Investors Hub

The major U.S. index futures are pointing to a higher opening on Tuesday, with stocks likely to move back to the upside following the pullback seen in the previous session.

The upward momentum on Wall Street comes despite an escalation of the trade war between the U.S. and China, as President Donald Trump announced new tariffs on approximately $200 billion worth of Chinese imports.

The markets may benefit from news the tariffs will initially be set at 10 percent compared to the 25 percent previously floated by the administration.

However, the tariffs are set to rise to 25 percent on January 1st, and Trump said the U.S. would impose tariffs on another $267 billion worth of Chinese imports if China takes retaliatory action.

A statement from China?s Commerce Ministry shrugged off the threat and pledged to retaliate in order to safeguard Chinese rights and interests and the global free trade order.

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?The U.S. insists on increasing tariffs, which brings new uncertainty to the consultations between the two sides,? a Commerce Ministry spokesperson said.

The spokesperson added, ?It is hoped that the U.S. will recognize the possible negative consequences of such actions and take convincing means to correct them in a timely manner.?

Stocks moved mostly lower over the course of the trading session on Monday, giving back ground after moving notably higher last week. The major averages all moved to the downside, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow fell 92.55 points or 0.4 percent to 26,062.12, the Nasdaq plunged 114.25 points or 1.4 percent to 7,895.79 and the S&P 500 slid 16.18 points or 0.6 percent to 2,888.80.

Lingering trade concerns weighed on the markets throughout the day, with stocks seeing further downside after President Donald Trump said an announcement on trade with China would be made after the close of trading.

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“You’re going to see on China today right after close of business, we’ll be announcing something,” Trump told reporters at the White House. “It will be a lot of money coming into the coffers of the United States.”

In a post on Twitter, Trump claimed tariffs have put the U.S. in a very strong bargaining position and called subsequent cost increases “almost unnoticeable.”

China has pledged to retaliate to any new tariffs imposed by the U.S., with reports suggesting the communist country could go beyond raising tariffs on U.S. imports and restrict exports of goods critical to U.S. manufacturing.

On the U.S. economic front, the New York Federal Reserve released a report showing a bigger than expected slowdown in the pace of growth in regional manufacturing activity in the month of September.

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The New York Fed said its general business conditions index fell to 19.0 in September from 25.6 in August, although a positive reading continues to indicate growth in regional manufacturing activity. The index had been expected to dip to 23.0.

Retail stocks showed a significant move to the downside on the day, dragging the Dow Jones Retail Index down by 1.7 percent. With the drop, the index moved lower for the third consecutive session.

Considerable weakness also emerged among telecom stocks, as reflected by the 1.5 percent loss posted by the NYSE Arca Telecom Index. The index pulled back after ending last Friday’s trading at a four-year closing high.

Brokerage, biotechnology, and semiconductor stocks also saw notable weakness on the day, while gold stocks bucked the downtrend amid an increase by the price of the precious metal.

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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