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Tech Tanks, Tensions Rise In Middle East, China Data Disappoints The Market

Thomas Hughes
Global markets are moving lower with chip stocks and tech in the lead. Weaker than expected data in China weighs on sentiment.

Tech Leads The U.S. Futures Lower In Early Trading

The U.S futures are lower in early trading despite a round of positive Retail Sales data. Retail sales rose 0.5% in May, in line with expectations, with sales ex-autos and core both 0.5% as well. The core figures are better than expected as is the revisions. Positive revisions to the previous month add momentum to the data and point to a solid consumer season this summer and fall. The Dow Jones Industrial Average posted the smallest decline in early trading, about -0.12%. The S&P 500 and NASDAQ Composite both shed more substantial amounts at -0.22% and -060% respectively

Chip stocks were in the lead, posting losses near -3.0%. The ongoing trade dispute with China is at the root of the matter although weaker than expected results from Broadcom sparked today’s rout. Broadcom missed expectations and provided soft guidance citing broad-based demand weakness. Shares of Broadcom fell nearly -10%. Shares of Micron, AMD, and Applied Materials were all lower.

EU Markets Broadly Lower, Tech Leads

The EU indices were broadly lower in Friday trading as weakness in tech tanked sentiment. The tech sector shed -2.0% but was not the only one showing weakness. Autos, Banks, and Basic Resources are all down about -1.0% at midday. The German DAX is leading the indices with a loss of -0.80%, the UK FTSE 100 is down about -0.55%, the French CAC about -0.44%.

In the UK, Boris Johnson has won the first round of votes for leadership of the Conservative Party. These results cement him as favorite to succeed Theresa May as Prime Minister. If he moves into 5 Downing Street the UK will exit the EU October 31st with a deal or without. In economic news, country-specific CPI for France and Italy was weaker than expected.

Tensions in the Mid East are also having an impact on today’s action. The U.S. has blamed Iran for torpedoing two tankers in the Gulf of Oman. This is the latest action in a series of attacks intended to provoke a response. If the escalation continues expert agree a tanker may get sunk. This situation is supporting oil prices which may be forming a bottom after the last month’s corrective action.

Weak Data In China Weighs On Markets

Weaker than expected Industrial Production in China weighed on sentiment in Asia. Chinese Industrial Production rose a mere 5.0% in the last month setting a 17-year low. The data is a sign of slowing in the Chinese economy and brings the official 6.5% GDP target into question. Shares in Shanghai led the decline, down an average 1.0%, while those in Hong Kong came in a close second. Protests in Hong Kong are ongoing.  The Korean Kospi fell -0.37%, the Australian ASX and Japanese Nikkei both made small gains.

This article was originally posted on FX Empire

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