US OPEN: Trade escalation between the US and Canada

The US stock market is starting the week with a moderate decline. The market is pricing in signals from the bond and commodities markets, but Nvidia’s key earnings release will not be published until Wednesday. Most Wall Street indices are down around 0.3 to 0.5%.

The declines are currently most pronounced in the US100, where losses are reaching 1%. The larger move in the tech index is a knock-on effect of declines in semiconductor and memory companies, which are down about 3 to 5% at the start of the session.

Many investors are still focused on the Treasury Secretary’s intervention in the bond market. The exact implications are still difficult to assess, but one of the most important questions is whether this intervention is a one-off action or the beginning of a new policy of steering bond yields.

For US and Canadian investors, the complete failure of the trade negotiations also matters. The problem for local businesses may be not only the introduction of further trade restrictions, but also the nature of the negotiations, which have less and less in common with diplomatic communication between developed states. This includes, among other things, demands from the US such as effectively giving up economic sovereignty and removing French as one of the official languages. The outcome of the negotiations between the US and Canada so far has been retaliatory sanctions by Canada of 20% on, among others, steel products and timber.

A moderately positive signal is coming from the Persian Gulf, despite the lack of success in negotiations between Iran and the US. According to the Energy Secretary, the volume of oil exports through the strait may be significantly larger, potentially twice as large, as publicly available data suggest. The trend of releasing supply from the region is also supported by Iran’s recent decision to allow a number of tankers belonging to Iraq to pass.

Company news

• Nucor (NUE.US): The producer and distributor of timber is gaining about 4%, following the retaliatory tariffs imposed by Canada on the US.
• Alibaba (BABA.US): The Chinese company listed in the US is down about 2% after a share issuance worth around USD 10 billion.
• PDD Holdings: The operator of the “Temu” platform is up more than 2% at the open after reporting better-than-expected results. Transaction fees, which rose by 13%, deserve particular attention.
• Applied Optoelectronics (AAOI.US): The photonics company is down as much as 16% after a regulatory filing indicating that the company is preparing a USD 600 million share offering.
• RegenxBio (RGNX.US): The pharmaceutical company is down as much as 25% after the FDA halted further trials of the gene therapy “RGX-121,” intended to treat so-called Hunter syndrome.
• ArcelorMittal (MT.US): The steel mill operator and distributor of metallurgical products is up about 2% after a positive recommendation from an investment firm.

Technical analysis of US100 (D1)

The chart shows the price moving clearly within a widening downward channel. The current weakness on the buyers’ side is reflected in a quick retreat from the area above about 30,000 points and a continued move toward the 61.8% Fibonacci level. The MACD line is crossing below the signal line, which could potentially support a scenario of continued correction. In this context, however, it is worth keeping in mind the overlapping resistance zones, especially the Fibonacci levels, the EMA100 average, and the lower boundary of the trend. This will be a very important test of sentiment, but breaking through such strong resistance may be a major challenge for sellers. Source: xStation5