US market – Trump pressed the sell button

Donald Trump
File Reuters

UNITED STATES (VOP TODAY NEWS) — The day before, Donald Trump tweets were posted. The US president is threatening to increase duties by $ 200 billion in Chinese imports already on Friday. The news provoked sales on world markets. Correction in the US stock market could start.

US stock futures fall pre market after Trump’s tweets are posted. On Friday, key indexes added 0.8-1.6%, the official report on the US labor market inspired investors to buy.

Previously, the S & P 500 updated the historical maximum, having gone to the area of ​​2950 points. On the pullback, the nearest support is 2880-2870 points. When fixing below, we can see the movement of the index to 2820 points. A good goal in the case of the development of a medium-term correction may be the mark of 2700 points. US and PRC

risks

The Chinese stock market on Monday lost 5.6%. On the eve, Donald Trump wrote in his Twitter account that he plans to increase duties on Chinese imports in the amount of $ 200 billion from 10% to 25% already this Friday, if the deal with China is not concluded. In the future, duties may increase by another $ 325 billion of “remaining” imports.

Negotiations were to resume in Washington on Wednesday. It was assumed that by Friday the deal will be concluded. The Chinese side announced that the visit will take place. However, according to the South China Morning Post, Vice Premier of the PRC State Council Liu He can cancel the trip or come a few days later with a short visit.

Positive factors

Monetary policy of world central banks.Last week a meeting of the Fed. The economy estimate was revised from a slowdown to solid growth. At the same time, a decrease in inflation was noted in the statement, which turned out to be below the 2% target of the Fed. Now the derivatives segment indicates a 57% chance of reducing the key rate by the end of the year.

In addition, in May, the curtailment of the QE program, on the contrary, began, which was a measure of monetary tightening.

Key report on the labor market.According to official data for April, employment in the non-agricultural sector (non-farm payrolls) increased by a solid 263 thousand. Unemployment fell to a new 49-year low, 3.6% per annum. However, the average hourly wage maintained a trend of 3.2%, being below the consensus forecast of analysts of 3.3%.

As a result, we have strong labor market indicators in the absence of accelerated inflation, which is in favor of the Fed’s soft rhetoric. I note the growth in employment in the construction sector by 33 thousand. This may be a seasonal phenomenon, which in the future will come to naught.

Chinese incentives.The People’s Bank of China on Monday morning reported a reduction in the reserve ratio for small and medium-sized banks to 8%. Previously implemented fiscal and monetary incentive measures had a positive effect on Chinese macro statistics for March.

However, the official business activity indexes (PMI) for April were less positive. In case of escalation of trade disputes, the business climate in the PRC may worsen. Early Thursday morning, China’s foreign trade and inflation data for April will be released.

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