Market Outlook – July 11, 2018

U.S. Stocks End in Positive Territory Anew


For the fourth straight trading session, U.S. stocks finished firmly in positive territory on Tuesday. Investors at Wall Street ignored the global trade disputes and instead shifted interest to the second-quarter earnings season.

The Dow Jones Industrial Average advanced in triple digits again, closing higher by 143.07 points (+0.6%). It’s the index’s first four-day rise since a similar streak ended last June 11. Meanwhile, the S&P 500 index rose 9.67 points (+0.4%) to end at 2,793.84. The broader index reached its highest close since February 1 when it closed at 2,821.98. Only the financials sector closed in the red yesterday.

The Nasdaq Composite Index edged up slightly by 3 points, (less than +0.1%) to virtually end unchanged at 7,759.20. The Dow Jones turned positive for the year on Monday and is now up +0.8% year-to-date after Tuesday. The S&P and tech- Nasdaq have advanced 4.5% and 12.4%, respectively.

U.S. Threatens China with More Tariffs


The Trump administration is raising the stakes once more in its trade dispute with China. United States President Donald Trump is threatening 10% tariffs on $200 billion worth of Chinese goods. On Wednesday, China’s commerce ministry said it was “shocked” and would complain to the World Trade Organization (WTO).

Beijing described Washington’s action as typically bullying. They felt the need for a counter-attack although there was no mention of how the country would retaliate. The spokesman said China would hit back against the escalating tariff measures even through “qualitative measures,” that could impact on U.S. businesses in China.

21st Century Fox Raises Bid Offer for Sky


In a move to gain advantage over rival Comcast Corp. (CMCSA), 21st Century Fox Inc. (FOXA) raised its offer for Britain’s Sky in an agreed deal valuing the pay-TV group at $32.5 billion. Rupert Murdoch’s Fox has been trying to acquire the pan-European group since December 2016.

Their latest offer is 14 pounds per share or a 12% premium to Comcast’s offer. On Wednesday, Sky shares were trading below 14.80 pounds. But analysts expect Comcast to make a higher counter-offer. The world’s biggest entertainment company came into the picture last February. Its entry forced the independent directors of Sky to drop their original recommendation for Fox’s offer.

Citigroup Prepares for Investment Flows in Asia


As concerns about the impact of the U.S.-China trade war is mounting, Citigroup Inc. (C) is preparing for more business. The bank will be setting up a China business desk in India. They foresee investment flows to pick up within the year toward the Asian region.

Citigroup’s Asia-Pacific corporate banking head, Gerald Keefe, said Citi plans to establish the desk in Mumbai. It will provide services such as trade finance, corporate loans, cash management and investment banking. A similar business desk is already operating in South Korea.

The move comes as the U.S. imposes more tariffs on Chinese goods. While there is fear of a protracted trade war, Keefe said investment and trade is growing elsewhere across Asia. Citigroup will capitalize on this growth through its banking network.

Huawei Faces Ban in Australia


Australia is preparing to ban Huawei Technologies Co. Ltd might be facing a ban in Australia.  The country is preparing to ban the Chinese telco from supplying equipment for its planned 5G broadband network after its intelligence agencies raised concerns that Beijing could force the No. 3 smartphone supplier to hand over sensitive data.

For years, Western intelligence agencies have raised concerns about Huawei’s links to the Chinese government. They also fear the possibility that its equipment could be used for espionage. However, public evidence has yet to be presented to support the suspicions.

Huawei has promised that Australian authorities Canberra will have complete oversight of the 5G network equipment. That could include base stations, towers and radio transmission equipment. But political sources told Reuters that Australian intelligence agencies told lawmakers that the said oversight will not dispel their concerns.

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