May 31, 2019
Top 5 Things to Know in the Market on Friday
1. Trump slaps Mexico with 5% tariffs
In a surprising move that would likely derail the U.S.-Mexico-Canada Agreement, U.S. President Donald Trump promised to place 5% tariffs on all Mexican goods exported to the U.S. until the country takes measures to stop immigrants from crossing the American border.Trump tweeted that the tariff would take effect on June 10 and last “until such time as illegal migrants coming through Mexico, and into our country, STOP”.
The president indicated that tariffs on Mexico would gradually increase if action was not taken. A statement released by the White House specified that they could rise as high as 25% on Oct. 1.
Read more: With Mexico Tariffs, Trump Goes A Step Further In Killing Oil Rally – Barani Krishnan
2. Trade worries hit risk sentiment sending stocks spiraling downwards
Global stocks registered a sharp selloff while sovereign bonds surged on Friday on fears that Trump’s shock threat of tariffs on Mexico risked tipping the U.S. into recession while disappointing China data added to the woes.
Asian stocks closed mostly lower with trade worries pummeling sentiment even as data released Friday showed that China’s factory activity in May contracted more than expected.
U.S. futures pointed to a sharp decline at the open on Wall Street. Dow futures sank 273 points, or 1.1%, by 5:43 AM ET (9:43 GMT), S&P 500 futures slid 33 points, or 1.2%, while Nasdaq 100 futures traded down 112 points, or 1.6.
U.S. bond yields touched fresh lows and parts of the curve inverted further, seen as a warning signal for recession in the world’s largest economy.
3. Uber shares higher after first earnings report as public company
The company’s $1 billion net loss was in line with its own financial guidance and analysts applauded improvements in take rates, the revenue received by the company after subtracting driver or restaurant pay and incentives, along with accelerating revenue growth.
4. Personal spending, income seen rising
Economic indicators kick off with the most recent numbers on personal income and spending ahead of Friday’s open at 8:30 AM ET (14:30 GMT).
The Federal Reserve’s preferred inflation gauge, core personal consumption expenditures, which exclude food and energy, is expected to post a 0.2% rise for the month, but remain at an annual rate of 1.6%.
At 9:45 AM ET (13:45 GMT), the Chicago purchasing managers index (PMI) for May comes out, with economists looking for the measure of Midwest manufacturing activity to tick up to 55.1.
And at 10:00 AM ET (14:00 GMT), the University of Michigan releases its revised consumer sentiment index for May. The index is edging down slightly from the preliminary measure to 102.0.
5. Trump’s tariffs on Mexico may make U.S.-China deal more unlikely
Though Trump’s announcement of tariffs on Mexico has shifted the focus of financial media headlines, the ongoing trade dispute between the U.S. and China simmered on the sidelines.
Analysts warned that Trump’s tariffs on Mexico make a deal between Beijing and Washington even more unlikely.
Their argument points to the fact that the recently agreed revisions to the North American trade agreement appear to have been derailed by Trump’s arbitrary decision, lessening the value of reaching any deal.