A sharp sell-off of global stocks on Tuesday caught the equity markets off-guard with both the Dow at its 2nd biggest percentage drop for the year, and both the S&P 500 and NASDAQ suffered their 3rd biggest drop.
Following the decline on Wednesday, the Shanghai Composite in China and the Nikkei 225 in Japan fell over 1%.
European stocks and currency
In midday trade, in spite of the boost in the increase in German industrial production, European stocks were down with the STOXX Europe 600 falling 0.2% and the FTSE 100 index slipping to its lowest in 6 weeks falling 0.2%.
The euro edged higher on the back of the German factory data gaining 0.1 percent to $1.1204.
Ahead of the arrival of high-level Chinese officials and trade delegations from Beijing in Washington for two-day trade negotiations, U.S. futures headed for a further drop with the Dow Futures down 86 points, or 0.3% at 5:45 AM ET. The S&P 500 futures slipped 9 points or 0.3% while the NASDAQ 100 futures fell 30 points or 0.4%
Data on China’s exports saw an unexpected decline while imports increased during the 5-month period.
Economists, who are concerned that there will be a global slowdown fear that this could worsen if there is a breakdown in talks after Trump’s rhetoric over the past couple of days on trade.
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Investors on edge ahead of negotiations
According to news reports, Trump will impose more tariffs on Chinese imports worth $200 billion starting from Friday, putting more pressure on China. The tariffs will include a number of items such as Hardware, bedsheets, bicycles, perfumes and more.
Senior economist at CME group, Erik Noland is of the opinion that the tariffs will cut the Chinese economic growth up to 1% and that corporate profits in the U.S. could fall 3%.
Crude oil rebounds
Oil prices rebounded on Wednesday from five-week lows as risks rise after President Hassan Rouhani of Iran sent an ultimatum saying that they will resume higher uranium enrichment, reducing their commitments to the nuclear accord. They are seeking an easing of sanctions to enable them to sell their oil within 60 days.
Quality issues with the flow of crude from Russia to the largest export pipeline to Europe are taking longer than expected to fix amid reports that only 1 of the 13 tankers at the Ust-Luga terminal had been loaded. This has impacted the rise in the price of oil.
Expectations, ahead of the release on U.S. oil stocks by the U.S. Energy Information Administration, is that there will be a buildup of 1.2 million barrels of crude with 0.4 million draws in gasoline stockpiles.
According to the American Petroleum Institute’s data of yesterday, there was an indication of an increase in crude inventories last week of 2.8 million barrels.
Lyft’s post-IPO losses
Since making its IPO debut on the NYSE in April, Lyft reported lower than expected quarterly loss with their shares falling 1.4% in premarket trade on Wednesday.
Disney’s strong Q2 earnings
At the close of markets on Wednesday, Disney is expected to be the best performer buoyed by the resounding success of the release of the movie ‘Avengers; Endgame’ which so far has a box office of over $600 million, domestically alone.
Estimates by analysts is that Disney shares will go up to $1.57 a share, currently on the year Disney shares are up 22% on the year and sits sixth on the 30 Dow stocks.
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