Markets Opened Lower As Trump Escalates Trade War -- Again

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Thursday, August 2, 2017, 10:22 AM, EST

  • NASDAQ Composite +0.20% Dow -0.35% S&P 500 -0.11% Russell 2000 +0.09%
  • NASDAQ Advancers: 1214 Decliners: 866
  • Today’s Volume (First Hour) +3.9%

The markets opened lower today as the Trump administration escalates its trade war, and no doubt just a coincidence that the Chinese yuan trades down 0.6% to its lowest against the dollar since May 2017. Markets in Asia closed in the red with the Shanghai Composite off 2% and European markets are down across the board. The S&P closed at the five-month high last Wednesday, but since then it is has traded lower in four of the past five sessions, but the major indices are moving off the opening lows. Most sectors are in the red with Materials (-1.1%) down the most, and Consumer Staples (+0.4%) and Tech (+0.2%) are the only bright spots. The dollar index gains 0.3% while treasuries firm slightly, and crude oil (-0.5%) is down for the third day as OPEC production hits all-time highs.

  • Yields are on the rise: With yields on the US 10yr treasuries back at 3% and yields on the Japanese bonds at an 18-month high, Bloomberg says yields on global government debt are now at four month highs. Bonds sales in the US are at their highest since 2010 with the Treasury Department increasing the size of bond auctions for the third consecutive quarter.
  • Unemployment claims hold near record lows and that bodes well for tomorrow’s Nonfarm payrolls. Last week 218k new claims were filed, consistent with recent weeks, and continuing claims fell to 1.724 million, the lowest in five weeks. Factory Orders matched expectations with an 0.7% increase, and ex-transports the measure increased 0.4%.
  • Nasdaq welcomes Sonos (SONO) to the market today. Sonos launches its IPO after raising $208 million. Nasdaq also welcomes Tottenham Acquisition (TOTAU) after it raised $40 million.

Technical Take:Down with the Yuan!

The Chinese Yuan has depreciated to fresh 12-month lows today as volatile trade war rhetoric continues to escalate. After bottoming from February through April, the offshore yuan/USD currency pair has been sharply rising reflecting yuan depreciation. It was only three years ago in August 2015 when a similar move in the yuan was credited as the catalyst for a sharp double digit decline in global equity markets. It remains to be seen whether or not a similar reaction will occur this time, as the economic backdrop is far more positive today.

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Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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