May 16, 2019, by Lorcan Roche Kelly
His way or the Huawei
In an escalation of the standoff with China, President Donald Trump moved to curb Huawei Technologies Co.’s access to the U.S. market and American suppliers. This would not only cut the company off from the U.S. market but also stop it buying essential supplies from chip giants such as Qualcomm Inc. and Micron Technology Inc., while also threatening the rollout of 5G technology across the world. A spokesperson for China’s Foreign Ministry said the country will take all necessary measures to defend legitimate interests of its companies.
The trade war heating up, continued worries about conflict in the Middle East and concerns over growth have all sent investors rushing to the relative safety of bonds. Treasury yields dropped again this morning, reaching the lowest level on a closing basis since 2017. Goldman Sachs Asset Management International is sounding a word of caution, saying yields are poised to rebound as the U.S. economy is just too healthy for Treasuries to be at this level. Also worth noting: China’s holdings of the global benchmark have started to fall for the first time since November.
Sterling dropped to a three-month low of $1.2821 this morning and headed for its longest losing streak against the euro since 2000 as the risk of a no-deal Brexit flared up again. The main opposition Labour Party said it wouldn’t back Prime Minister Theresa May’s latest attempt to get her withdrawal agreement through Parliament, even as she faces more leadership challenges from within her own party. Meanwhile, there are further signs that companies in the U.K. are suffering from the continued uncertainty.
Overnight, the MSCI Asia Pacific Index slipped 0.3% while Japan’s Topix index closed 0.4% lower with electronics makers weighing on the gauge in the wake of Trump’s move against Huawei. In Europe, the Stoxx 600 Index was broadly unchanged at 5:50 a.m. Eastern Time in a session that has mostly traded in negative territory. S&P 500 futures pointed to a fairly quiet open, the 10-year Treasury yield was at 2.375% and gold eased.
At 8:30 a.m., we get the weekly update on jobless claims, with U.S. April housing starts and the Philadelphia Fed business outlook also at that time. Fed Vice Chairman for Supervision Randal Quarles, Minneapolis Fed President Neel Kashkari and Fed Governor Lael Brainard are today’s monetary speakers. Walmart Inc., Nvidia Corp. and Baidu Inc. all report earnings.