Summary:
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US stock markets set for another soft open
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Report reveals China backtracked on US trade deal
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Uber drivers to protest ahead of IPO
It’s set to be another lower open for Wall Street this afternoon with US markets remaining under pressure after beginning the week with their worst two day fall since January. Even after these declines the markets remain not too far from their record highs, but a spike in the volatility index serves as a timely reminder that the sanguine attitude that has encapsulated equities for much of the year may be a little remiss.
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The spike higher in the volatility index could be a harbinger of things to come with a notable divergence opening up between VOLX and the S&P500. Stock markets bulls will want to see the VOLX fall back below 17.90 to indicate that the fear in the market is subsiding once more. Source: xStation
The cause of this weakness is readily apparent with US and Chinese trade tensions flaring up once more and a recent story in Reuters has provided some details on what sparked the breakdown in progress that caused Trump to tweet his warning on further tariff increases. A diplomatic cable from Beijing to the US late on Friday night revealed systematic edits to the nearly 150-page trade agreement and has dashed hopes that the world’s two largest economies are on the verge of calling a truce in their ongoing trade war. According to Reuters: “In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.”
Nomura US-China scenarios:
- 10% chance US-China reach an agreement this week
- 40% chance US postpones tariffs and negotiations continue
- 45% chance new tariffs go into effect and negotiations continue
- 5% chance talks completely break down & China retaliates
US stocks dropped further after breaking rejecting the H4 cloud yesterday to make a low of 2862. Below there a gap fill to 2839 is possible while 2899 may be seen as the first level of possible resistance. Source: xStation
Ahead of Friday’s IPO, Uber is attracting a lot of attention with the ride-hailing apps debut on the NYSE set to be one of the biggest in several years. The IPO is expected to be valued at around $90B which puts the shares in the $44-50 per share range but ahead of the event, there’s been protests from the firm’s drivers who have been logging off the app and taking to the streets in cities around the world to protest. These protests are also against rival firm Lyft and are occurring around the US in New York, Chicago, San Francisco after overnight strikes began in Sydney, Brisbane and Melbourne in Australia. In the UK drivers have planned a nine-hour boycott of the ap from 7AM to 4PM in London, Birmingham, Nottingham and Glasgow. Fares in London were surging at 1.8X their normal rates this morning but that could well be due to the rain rather than a lack of driver availability!
Lyft shares surged by over 20% on the day of their IPO back in March, but the stock has since stalled and gone into reverse, with the market making a low of 54.22 at the end of last month. Source: xStation
