Stocks flat as US China tensions rise

Stocks flat as US China tensions rise 150 150 Realm

The Trump administration says it will increase restrictions on China’s Huawei, raising tensions a notch higher between the two countries. Markets are also weighing the chances of a second wave of coronavirus cases across Europe as Germany recorded the highest number of new cases in nearly four months. A new round of Brexit talks start in Brussels today.


Global Macro

  • The New York Empire State Manufacturing Index fell to 3.7 in August of 2020 from 17.2 in July, well below market
    forecasts of 15 and signaling a slowdown in the pace of growth compared to July.
  • The NAHB housing market index in the US rose 6 points from the previous month to 78 in August 2020, beating market
    expectation of 73. It was the highest reading since December 1998, as sentiment rebounded following the easing of
    coronavirus lockdown restrictions and as record-low mortgage rates boosted demand for new homes. The current
    single-family sub-index increased to 84 from 78 in July and the one for prospective buyers advanced to 65 from 57. Also,
    the gauge for home sales over the next six months went up to 78 from 75 in the prior month.
  • Gold extended gains to a level not seen in nearly a week, as a weaker dollar and a pull-back in US Treasury yields boosted
    demand for the safe-haven metal. Supporting prices further were lingering concerns over a stalemate in US fiscal
    stimulus bill talks, and simmering US-China tensions after a planned review of their trade deal were postponed.
  • Oil prices edged down as the energy market turned its focus to an OPEC-led meeting of the Joint Ministerial on
    Wednesday. OPEC’s optimism for greater compliance with its deal with other producers to cut production to clear a glut
    that has weighed on the market. Compliance with OPEC+ oil output cuts is seen at 95% to 97% in July. Still, lingering
    concerns over a stalemate in US fiscal stimulus bill talks and simmering US-China tensions have been rattling investors.
  • On Monday: European stock markets shook off early inconsistency to finish higher, riding positive sentiment after the People’s Bank of China injected liquidity into the financial system to help lenders manage upcoming government bond sales. A mild rebound in crude oil prices added to the optimism as the markets snapped a two-day losing streak. US stocks stocks showed a lack of direction, extending the lackluster performance seen in the previous session. The major averages spent the day bouncing back and forth across the unchanged line. Traders seemed reluctant to make more significant moves amid uncertainty about the near-term outlook for the markets. Asian stocks ended mixed as worries about rising U.S.-China tensions and the stalled U.S. stimulus talks overshadowed hopes of more supportive monetary policy from China. A cautious undertone prevailed after the U.S. and China postponed virtual trade talks planned for this weekend.

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