Market Outlook – June 1, 2018

U.S. Stocks Close Lower due to Trade War Fears

 

With the decision of the U.S. to impose metals tariffs (steel and aluminum) on imports from Canada, Mexico, and the European Union, U.S. stocks closed lower on Thursday. The fears of a trade war have been reignited.

The Dow Jones Industrial Average declined 251.94 points (- 1%) while the S&P 500 Index fell 18.74 points (-0.7%). The Nasdaq Composite Index ended lower by 20.34 points (-0.3%).  For the month of May, the tech-heavy Nasdaq posted a 5.3% increase, the broader S&P 500 advanced 2.2% and the blue-chip Dow booked a 1% monthly rise.

U.S. Reignites Trade War

 

Now that the U.S. has started a global trade war, their biggest allies and trade partners vow to fight back and retaliate with tariffs on American products worth billions of dollars.

Canada, Mexico, and the European Union wasted no time on Thursday to respond to the new U.S. metals tariffs with punitive measures as well. The European Commission, through its president Jean-Claude Juncker, said the bloc would move to implement tariffs that could affect $7.5 billion worth of US exports. The commission will also file a case with the World Trade Organization (WTO).

Meanwhile, Canada’s Foreign Minister Chrystia Freeland gave an outline of their retaliation plan. Tariffs will be imposed on American goods, including steel and aluminum. Some products will be taxed 10% and others up to 25%. The total estimated worth is $12.8 billion which is equivalent to the total value of last year’s Canadian steel and aluminum exports to the United States in 2017.

Wall Street Expects Better Jobs Report in May

 

Economists are predicting that 225,000 new jobs may have been added in May. They also see the unemployment rate to remain below 4%. The yearly growth in worker pay would be close to the current pace of 2.6%. If Friday’s report is as good as the experts suggest, it becomes almost certain the Federal Reserve will raise its benchmark interest rate during its June meeting.

Goldman Sachs Exec Charged with Insider Trading

 

On Thursday, federal prosecutors charged Goldman Sachs Group Inc.’s (GS) Vice-President Woojae “Steve” Jung with insider trading. The 37-year-old Korean citizen profited more than $130,000 by trading illegally using non-public information on several clients of the investment bank. He made use of these confidential information he was privy to particularly on upcoming transactions and merger negotiations.

Jung has been with the bank since 2012 and worked in San Francisco. The accused used a brokerage account in the name of a friend living in South Korea. The U.S. Securities and Exchange Commission was able to access the brokerage account  from internet addresses. It was traced to that were traced to Jung traced the brokerage account.

Qualcomm-NXP Deal Still Under Anti-Trust Review

 

According to Reuters, China’s State Administration for Market Regulation (SAMR) is still conducting an anti-trust review of Qualcomm Inc.’s (QCOM) proposed $44 billion acquisition of NXP Semiconductors NV (NXPI). The market regulators also said on Friday that there are ongoing talks with Qualcomm. Both sides are looking to  eliminate the negative impact from the deal.

China is the only global regulator among nine required that hasn’t approve the merger. Observers are saying China is using this as leverage against the  U.S. Recently, Trump ordered a  ban on sales by U.S. companies to China’s ZTE Corp.

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