Summary:
- Donald Trump targets Chinese trade practices
- S&P 500 (US500 on xStation5) opens significantly lower and trades in the vicinity of 2900 pts handle
- Warren Buffett stays upbeat on tech sector
Stock markets in Asia and Europe took a significant dive lower on Monday as investors were thrilled that Donald Trump may raise tariffs on Chinese goods. Opening of the US session was no different with all three major stock market indices from Wall Street launching today's trading significantly lower. Industrials and miners were among the worst performing S&P 500 stocks at the beginning of the session while utilities were the only ones to stay in green.
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Donald Trump sent another tweet on trade with China on Monday. Source: Twitter
Donald Trump shocked the world over the weekend as he threatened to impose 25% tariff on all of the Chinese goods flowing into the United States. Such threats come after months of negotiating trade deal and after numerous “progress is being made” slogans. Today we were offered another tweet that showed he is definitely not backing (see the picture above). Consequences of reigniting the Trade War can be devastating for the global economy and, unfortunately, China took action already. While no retaliatory tariffs were imposed yet, this week’s trip to the United States was removed from the schedule of Vice Premier Liu He - key trade negotiator for China. Having said that, it seems likely that no breakthrough will occur anytime soon (it was rumoured that the final round of talks will take place this week). For markets the key is whether China retaliates or not and if it does more pressure may come. Our more in-depth coverage of new developments concerning trade can be found here.
US500 (S&P 500 futures underlying) opened in the vicinity of 2900 pts handle on Monday, significantly below last Friday’s close). The index dipped in the pre-session trading towards the support zone ranging around the 2880 pts handle but a part of this loss was already erased. Note that in case bears continue to dominate on the market a break below the aforementioned zone cannot be ruled out. However, the 50-session moving average runs just a notch below the zone therefore sellers may find it harder to deliver a bigger downward move. Source: xStation5
Company news
Berkshire Hathaway (BRKA.US), the US insurance company led by legendary investor Warren Buffett, reported earnings for the first quarter of 2019 on Saturday. The company had $21.8 billion of net income in the first three months of the year. However, this result includes unrealized gains and losses on the securities portfolio and those are characterized by significant volatility. Adjusting earnings for the impact of unrealized gains and losses we get a figure of $5.555 billion - a 5% increase against last year’s value. What investors may find especially interesting are remarks from Warren Buffett and Charlie Munger. Two investors admitted that they were mistaken when it comes to the tech sector and in turn missed lucrative profit opportunity. Nevertheless, they said that they remain upbeat on technological companies and the recent purchase of Amazon.com (AMZN.US) stock shows they are serious.
Kraft Heinz (KHC.US) reported that it will have to restate its financial reports for 2016 and 2017 as they have contained some faulty information. The company said that it has found out an employee misconduct that resulted in misreporting. However, the total amount of restatements of $181 million seems to be rather minor in relation to the size of the company.
Occidental Petroleum (OXY.US) made an important change to the bid offer for Anadarko Petroleum (ADC.US). Instead of paying equal amounts in cash and stock, Occidental will pay over 70% of the transaction value in cash. Such a move will allow the company to avoid issuing big amount of new shares and in turn Occidental will not have to ask shareholders to approve the deal. Occidental’s shareholders were expected to show some opposition towards the deal as the price is by many labelled as too high. Nevertheless, shareholders of Anadarko still have to give a green light to the transaction.
Occidental Petroleum (OXY.US) has been underperforming throughout the major part of April as markets viewed its Anadarko (APC.US) bid too high. The stock declined towards the long-term support zone ranging $57.40-58.20. A bounce higher could be delivered from there but one should keep in mind that sentiment is quite bearish. Source: xStation5
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