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The New York Stock Exchange advanced Thursday, the day after a holiday for the American Independence Day. On the front of trade tensions, investors preferred to see the glass half full, welcoming signs of relaxation between the United States and the European Union on taxes on cars. On the other hand, the imminent kick-off of hostilities between Washington and Beijing has not been sanctioned, while each country has planned to tax Friday morning $ 34 billion of products on both sides of the Pacific. The Federal Reserve has been concerned about the effects of trade tensions on investment decisions by US companies in the minutes of its June meeting, published Thursday evening.
Thursday night, the Dow Jones Index ended up 0.75% to 24,356 points, while the broad S & P 500 index gained 0.86% to 2,736 pts, and the composite Nasdaq, rich in technology and biotech stocks, rose 1.12% to 7.586 pts
On the foreign exchange market, the dollar index, which reflects its evolution against a basket of 6 currencies, fell 0.27% to 94.42 points, while the euro gained 0 , 3% to $ 1,1690. On the bond market, interest rates remained stable on Thursday, with 10-year US T-Bond yield ending at 2.83%.
Surprise rise in US oil stocks
Oil retreated after the announcement of an unexpected rise in weekly oil stocks in the United States. The August WTI futures contract lost 1.62% to $ 72.94 on the Nymex, while Brent dropped 1.09% to $ 77.39.
Inventory crude oil ballooned 1.2 million barrels in the week to June 29, while economists expected an average drop of 3.5 million barrels. In addition, geopolitically, the US military has responded to Iran's warnings over the Strait of Hormuz, warning Thursday that it stood ready to protect the freedom of navigation.
Trade: the Fed worries about investment and confidence
Investors looked at the Fed's Minutes, which confirmed the central bank's intention to continue raising interest rates gradually. However, the Fed has also worried about rising trade tensions around the world. The latter could hurt investment and confidence, said the Fed in the minutes of its meeting of 12 and 13 June, after which it had raised its policy rates to 1.75% – 2%
"Most (members of the Fed) observed that the uncertainty and risks associated with trade policy had increased and expressed concern that such uncertainty and risks can not have long-term negative effects, "noted the Minutes.
The US employment figures in June expected Friday
In fact, US economic indicators released on Thursday blew hot and cold. On the one hand, the ISM services index came out better than expected in June at 59.1 against 58.3 consensus. A reassuring figure as services account for about 80% of US GDP.
The latest employment indicators, on the other hand, have been a little disappointing, pending the full June data, which will be released on Friday. The ADP firm's report on private employment reported 177,000 job creations in June against 190,000 consensus and after 189,000 in May.
In addition, the Challenger firm's study counted 37,202 job cuts in June, after 31,517 layoffs unveiled in May. Lastly, weekly jobless claims rose by 3,000 last week to stand at 231,000, while the consensus was on a level of 225,000.
Slight detente with the European Union, but conflict with the China
On the trade front, tensions seemed to be easing somewhat between the United States and the European Union. For example, the US proposed to exempt European cars from taxes if the EU removed its own 10% tax on US cars. In response, German Chancellor Angela Merkel said on Thursday that she was "ready" to negotiate a general drop in taxes on the car, provided that "all the countries" involved are involved.
In contrast, the war appears to be on the verge of bursting between Washington and Beijing as early as Friday morning. Customs barriers of 25% on $ 34 billion of Chinese products (first tranche of a $ 50 billion batch) come into effect at zero hour and a minute on Friday morning, Washington time, that is to say at 06:01 French time, announced the US Trade Representative's Office (USTR) on Thursday evening.
The second tranche of 16 billion Chinese imports is currently subject to further examination by the representative of the United States. Commerce Robert Lighthizer.
Washington targets Chinese industrial products, Beijing taxes US soybeans
China on Thursday accused the United States of "opening fire" on the world with these taxes , saying that Beijing will respond immediately, also imposing taxes of 25% on 34 billion US dollars in the minutes following the implementation of US taxes. For the additional $ 16 billion expected, Beijing has planned to respond in the same way.
US taxes are to hit Friday 818 Chinese products, including cars, aircraft components or computer hard drives, but they will save some consumer product such as cell phones or TVs. Among the American products covered by Chinese taxes are notably soybeans (China buys only one-third of US soybeans!) And automobiles.
The United States accuses Beijing of its colossal trade deficit – which has reached $ 375 billion in 2017 for the only goods, according to Washington–, as well as the looting of the intellectual property of the American companies.
VALUES TO FOLLOW
Fiat Chrysler Automobiles jumped 6% after the group announced sales of 202,264 vehicles in the United States during the month of June 2018. The group's US monthly sales are up 8% compared to June 2017 (187,348 vehicles) . The Jeep brand recorded a record month of June, with 86,989 vehicles sold, compared to 73,153 in June 2017. The share also enjoys a very favorable trend in the automotive sector today, due to hopes of negotiations between the US and Europe on the subject of taxes. The title of Ford Motor took 0.5% and that of General Motors gained 1.28% Thursday evening.
Tesla (-0 , 5%) failed to rebound after falling 7.2% Tuesday night. Despite the achievement of the Model 3 production target at the end of June, operators still doubt the group's ability to sustainably register in a virtuous circle. The objective of the 5,000 Model 3 produced in a week would have been achieved at the cost of significant sacrifices, according to some American financial media.
Boeing (stable) and Embraer (-10.3% for the ADR listed on the Nyse) signed a memorandum of understanding to establish a joint venture comprising the commercial aircraft business and services of the Brazilian group. The entity would be strategically aligned with Boeing's commercial development, production, marketing and service operations. Under the terms of the agreement, the US aerospace group will hold an 80% interest in the joint venture, Embraer holding the balance. The deal values Embraer's 100% business for $ 4.75 billion, with Boeing's 80% stake in the joint venture valued at $ 3.8 billion. The proposed partnership is expected to contribute positively to Boeing's earnings per share beginning in 2020 and generate pre-tax annual cost synergies of approximately $ 150 million per year. The management of the new entity will be in the hands of Brazilians (President and CEO) while Boeing will have operational control. The US company estimates that the transaction should be finalized by the end of 2019, ie between 12 and 18 months after the execution of the definitive agreements
Praxair (+ 3%). The Japanese actor of industrial gases Taiyo Nippon will buy some European activities of the US group Praxair for 5 billion euros. The transaction aims in particular to ensure the success of the merger of Praxair with the German group Linde (+ 4.5% in Frnacfort), in the context of a merger of $ 83 billion by exchange of securities giving birth to an industrial leader exceeding Air Liquide (+ 1.6% in Paris)
Linde also promised further sales, in order to obtain the approval of the European Commission for this merger giant. Linde hopes to finalize the merger in the second half of 2018.
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