GLOBAL STOCKS SLIDE, U.S Q4 GDP DATA REVISED UP TO 2.9%
Jitters on trade wars returned to the market today after a story by a Chinese state-run media suggested that the country was preparing a list of American goods to impose tariffs on. The news came after a report on Sunday indicated that the two countries were working on a deal to ease the trade tensions. As a result, most indices were down, with the DAX, Nikkei and Shanghai falling by 0.40%, 1.34%, and 1.50% respectively.
The news came after the U.S stock market ended the day lower led by technology stocks. This came after investors started wondering about the sector and the regulations that could follow. The decline was led by NVIDIA, which dropped by almost 10% after the company halted tests on autonomous vehicles. Another major loser was Facebook, which announced that Mark Zuckerberg would testify about the privacy issues.
Another major news item today was from China, where Kim Jong Un held a two-day meeting with Chinese leaders. The country organized the meeting to assure China that the upcoming meeting with the United States would not harm relations. Kim Jong Un also assured the Chinese that his country would follow a path of denuclearization if all the threats were removed.
The U.S. dollar rose after data from the Bureau of Labor Statistics showed that the economy grew faster in the fourth quarter than earlier reported. The data showed that the country’s GDP grew at an annualized rate of 2.9%, which was a revision from 2.5%. At the same time, consumer spending which represents the biggest part of the economy rose by 4%, up from the estimated 3.8%.
The EUR/USD pair was little changed even after data showed that the economy grew faster than earlier reported. The pair is currently trading at 1.2388. It is trying to cross the support of 1.2380 which was formed recently. Perhaps, the reason the pair has not had a major reaction is due to fears of a trade war. As mentioned before, this pair could see significant fluctuations as traders wait for clarity on trade.
Germany’s DAX started the day by falling to €11,762 following the talk of a trade war. It was also reported that Germany and France were disagreeing on how to deal with US tariffs. While Germany prefers offering concessions to Trump, France prefers a more hardline stance.
Later in the day, it had a slight recovery as short-sellers took profits. The loss came after yesterday’s rally when the index soared after reports of negotiations between the two biggest economies were underway. As shown below, the double SMAs show that the index could recover. However, the RSI is above 70 while the momentum on the MACD is slowing. This calls for caution when going long.
NASDAQ futures fell to the lowest level since February after traders started worrying about regulations in the tech industry. This comes after reports emerged that Cambridge Analytica used data from Facebook to target ads. The major losers yesterday were Facebook, NVIDIA, Twitter, and Apple. Meanwhile, Morgan Stanley released a report that showed Microsoft could soon reach a $1 trillion valuation.
At this point, as shown below, the index could be oversold, especially coming a few weeks before the earning season starts. The growth in the sector could continue to accelerate, lifting the index from its lows.