A single tweet from President Trump six days ago is set to leave Wall Street stocks with the worst weekly losses since the December selloff.
That said, major indexes have given up only a chunk of 2019’s hefty gains. The next move for equity benchmarks hinges on Washington and Beijing for now. U.S. trade tariffs on China goods were increased to 25% just a minute after midnight Friday, even as China and U.S. officials head back to the drawing board. Where China takes its threat of potential retaliatory tariffs next is also a big question for investors.
Onto our call of the day from Bank of America Merrill Lynch, which attempts to navigate this state of investor purgatory brought on by the Sino-American trade strife. The bank’s strategist offer three trade-deal outcomes and what they could mean for the S&P 500:
- Deal gets done — the S&P 500 rallies toward 3,000, with transportation stocks, semiconductor stocks, the German DAX, Korea’s KOSPI index and global banks among those poised to benefit most.
- Postponed deal—S&P 500 falls to 2,775, then rallies. Under this scenario, strategists advise selling exposure to a gauge of stock market volatility—the Cboe Volatility Index
- No deal—the Fed would be forced to cut interest rates (on the idea that a trade war would cause economic and market chaos) the S&P 500 falls to under 2,600, investors pull out of perceived riskier assets such as tech stocks, emerging-market debt and investment-grade corporate bonds
Read: Why stock-market investors fear another ‘VIX-driven air pocket’ as volatility spikes
B. of A. also is keeping a keen eye on Korea’s main stock index
and say if it falls below December lows, it would “lead to contagion across high beta cyclical assets.” (See chart below).
The whole tangled trade affair has elicited calls from a host of other analysts. Here are a few others that don’t seem bullish:
Strategists at Lombard Odier Investment Managers say prepare for an extended period of volatility as they see trade-deal negotiations getting worse before they get better.
“There is the potential for a 15%-plus correction in Chinese and emerging market (EM) stocks, and around 5-7% falls in global equities, in our opinion,” said Salman Ahmed, chief investment officer and Didier Rabattu, head of equities.
From analysts at Société Générale: “No matter what, tensions look set to linger over the coming weeks.”
Read: Goldman says these are the stocks to buy if an all-out U.S.-China trade war erupts
, S&P 500
are pushing lower as trading gets underway.
The U.S. dollar
is softer, while gold
is continuing an upside run, while crude
is also up. Bitcoin
is having another upbeat day.
It has also been solidly green for Europe stocks
What trade worries? The Shanghai Composite
jumped 3% for its best daily percentage gain since March. Either that was optimism ahead of a potential trade breakthrough, or some other forces were at hand. Beijing has been trying to keep its investors calm, employing state media to convey a message of normalcy.
will start trading on Friday at $45 a share, with the ride-sharing is set to raise more than $8 billion— the biggest IPO since Facebook
in 2012. Here are 5 things to know about the deal. Plus:The end of the cheap ride
The marriage of the craft brewers: Boston Beer
is buying Dogfish Head Brewery in a $300 million cash-and-stock deal.
The richest man in India has bought Hamleys, the world’s oldest toy retailer.
Higher rents and gasoline costs pushed up consumer prices in April, but it may not be much to worry about. Still to come: the Federal budget and a few Fed speakers.
Amazon’s Jeff Bezos says it is time to get back to the moon and stay there
Glamorous grifter gets up to 12 years in jail for swindling rich pals
U.K. mom now uses pacemaker after near deadly addiction to energy drinks
The person who left a Starbucks cup on Game of Throne’s set looks a lot like Aquaman
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