Chaos on the Stock Market - Tech Stocks Gain Unabated Amid Trade Uncertainties
Pending Decision on Whether to Commence the Procedure by the Commission
Amid ongoing trade disputes between China and the U.S., Wall Street remains unfazed, with tech stocks leading the charge. The trade tension remains a source of uncertainty, but investors seem undeterred.
On Tuesday, Wall Street closed in the green, with tech stocks taking center stage. The Nasdaq Composite is back in the black for the year, shrugging off latest tariff announcements from President Trump. While questions abound about whether the U.S. and China will reach a final trade deal, the battle rages on. Both countries have accused each other of undermining previously agreed-upon deals. The Trump administration, meanwhile, has urged its trading partners to submit their best offers for trade talks within five weeks.
"The outcome remains to be seen, but it seems like a high-level call between Trump and Xi could be necessary to break the impasse. Some in the Trump administration have suggested such a call could happen this week," said Michael Brown, market strategist at Pepperstone. White House press secretary Karoline Leavitt confirmed a call "very soon" between Presidents Trump and Xi Jinping, without specifying the date.
Tech Stocks - A Shield Against Global Turmoil
Trade disputes between these economic giants have significant implications for tech stocks, particularly due to the critical components like rare earths and magnets that are crucial for electronics manufacturing. These minerals, primarily sourced from China, play a vital role in the production of key tech products, potentially leading to supply chain disruptions and increased costs for tech companies.
Despite these challenges, tech stocks continue to outperform, demonstrating investor confidence in the sector's resilience. Shares in tech companies like Nvidia, Super Micro Computer, Micron Technology, Walt Disney, Dollar General, and MoonLake Immunotherapeutics saw gains, highlighting the sector's attractiveness even in uncertain times.
The Bigger Picture - Economy at Stake
New projections from the Organisation for Economic Co-operation and Development (OECD) illustrate how the trade dispute is undermining economic hopes. The OECD has again lowered its forecasts for global economic growth this year and next, citing increased trade barriers and persistent uncertainty. The U.S. is particularly negatively affected, according to the OECD. Meanwhile, China has reported weak economic data.
On the bond market, yields were little changed, recovering from initial moderate losses. UBS expects rising prices and falling U.S. yields due to growth risks. However, analysts do not expect the yield to drop below 4 percent for the 10-year maturity in the coming months.
Gold - A Safe Haven, Oil - On the Rise
The dollar's strength weighed on the gold price, causing it to lose 0.8 percent to $3,353. However, the precious metal continued to trade near its recent multi-week highs, traders said. The ongoing trade conflict continued to boost demand for "safe haven" gold. Despite gloomy economic prospects, oil prices continued to rise, with notations for Brent and WTI increasing by up to 0.9 percent. Low hopes for a ceasefire in Ukraine made additional Russian supply less likely, traders said. Additionally, the U.S. Congress is preparing new Russia sanctions that are expected to target the oil sector.
Sources: ntv.de, toh/DJ
Insights:
- The trade dispute between the U.S. and China has significant implications for tech stocks, particularly due to the critical components like rare earths and magnets that are crucial for electronics manufacturing.
- A potential call between President Trump and President Xi Jinping could momentarily stabilize markets if it leads to positive announcements or suggests progress in trade negotiations. However, it is unlikely to offer a lasting solution to the ongoing trade disputes and their impact on the tech sector.
- While tech stocks are proving resilient in the face of trade uncertainties, they are still vulnerable to supply chain disruptions and increased costs due to their reliance on critical minerals sourced primarily from China.
- The ongoing trade conflict between the U.S. and China not only impacts economic growth but also influences the price of safe haven assets like gold and oil. The strong dollar has weighed on the gold price, while the ongoing trade dispute has boosted demand for gold. Meanwhile, oil prices have continued to rise due to low hopes for a ceasefire in Ukraine and the looming threat of new Russia sanctions.
- The Commission (OECD) has lowered its forecasts for global economic growth this year and next, citing increased trade barriers and persistent uncertainty partly due to the ongoing tech trade disputes between the US and China.
- Technology companies like Nvidia, Super Micro Computer, Micron Technology, Walt Disney, Dollar General, and MoonLake Immunotherapeutics continue to outperform, suggesting that technology remains a shield against global turmoil amid ongoing trade uncertainties and potential supply chain disruptions for critical components like rare earths and magnets.
