It’s time now for a look at the market action this afternoon, and for that I’m joined on the line by Mr. Daniel Yoo, Global Strategist at Kiwoom Securities.
Mr. Yoo, thanks for coming on today.
You’re welcome.
So, let’s start on Wall Street ahead of the big summit with China. The S&P down around a tenth of a percent, the Nasdaq about a third. What are investors seeing out there?
US market seemed still jittery about the G20 meeting yet as it showed mixed signals.
Nasdaq was up 0.32% but that is after 1.5% decline on the previous day, while S&P 500 continues to fall. Even though Mnuchin: ‘We were about 90% of the way’ on China trade deal and there’s a ‘path to complete this’ That is because on May 5th Trump spooked the market by raising tariff on China from 10% to 25% for 200 bn worth of goods.
“We were about 90% of the way there [with a deal] and I think there’s a path to complete this,” Mnuchin says in Bahrain.
“Trump is meeting his Chinese counterpart Xi Jinping on Saturday at the G-20 summit in Osaka, Japan.
“A Bank of America Merrill Lynch survey of investors finds that about two-thirds expected no deal this weekend, but no new tariffs either.
As for other markets, despite flat European market, Asian market did fairly well in expectation of better news flow on trade than before.
Japan up 0.92%, Shanghai 0.8%, Shenzhen 1.04% up
Korea also up 0.8% for Kospi and 0.1% Kosdaq
Meanwhile the Chairman of the Fed has taken this talk of a rate cut down a notch. He was speaking to the Council on Foreign Relations and he said essentially that the Fed won’t be bending to political interest, which of course is a reference to President Trump. How big of an effect did that have on the market?
Also, Powell Fed Chairman wants to downplay the rate cut card as too high expectation is creating bubble for bond market. However, in my view, Fed will lower interest by 25~50 bps in the future, that will fuel the equity market performance
The market’s mood today was vastly different from yesterday, when Fed Chair Jerome Powell’s comments brought the bears out. Powell said the Fed is insulated from short-term political pressure. His comments came as President Trump is at loggerheads with the central bank. Trump would like to see the Fed cut rates faster. Powell’s comments suggested that this may not happen, bringing the S&P 500 down 0.95% yesterday.
However, market is putting more weights on Trump.
Donald Trump has launched an extraordinary attack on the Federal Reservechairman, Jerome Powell, adding to a barrage of recent criticisms of the central bank, which he blames for slowing economic growth.
The US president has previously asserted that he has the power to demote Powell but denied that he had threatened to do so.
Speaking on Wednesday in an interview with Fox Business Network, Trump appeared to mock Powell, whom he chose to chair the Fed.
Trump said: “He’s decided to prove how tough he is, because he’s not going to get pushed around? Here’s a guy, nobody ever heard of him before. And now, I made him, and he wants to show how tough he is. OK. Let him show how tough he is.
“He’s not doing a good job.”
He added that the Fed’s policy of raising interest rates and cutting back on its bond-buying quantitative easing had gone too far and was “insane”.
Trump also suggested that Mario Draghi, the outgoing president of the European Central Bank, would be a better leader of the Fed than Powell.
The Fed makes its decisions independently from the White House, but Trump has broken with decades of precedent in directly criticising interest rate rises. Higher interest rates make it more expensive to borrow, slowing down economic growth.
I agree with Trump. Liquidity injection will happen.
Now we’re talking about crypto again, with Bitcoin on the Chicago Mercantile Exchange up to around 13-thousand dollars. Why is bitcoin back, and how is this any different than 2017?
Ever since Bitcoin broke out of the lowest bear market trading range where its yearly lows were set, the crypto asset has skyrocketed, reaching prices not seen since before the bear market began in 2018.
Alongside Bitcoin price itself, the crypto asset’s dominance comparative to other assets in the crypto market – altcoins such as Ethereum, Ripple, and Litecoin – has also grown to levels not seen since the previous bull run.
When you have all the central bank lowering interest rate, people worry about Currency war. Interest on alternative currency investment rise sharply.
Gold and Cryptocurrency interest has risen.
Super computer, bitcoin demand. Forth industrial revolution plays significant card in price boost.
US extends trade ban to Chinese supercomputing companies
The US Department of Commerce will extend its trade ban to five supercomputing companies that buy chips from US companies, such as Advanced Micro Devices, Intel, and NVIDIA, starting on June 24.
The ban comes a week before the meeting of US President Donald Trump and Chinese President Xi Jinping at the G20 Summit, where the two are expected to talk about easing trade tensions. The US ban could complicate the trade talks between the two presidents and reduce the probability of a successful negotiation.
Alright, Mr. Yoo. That’s where we’ll leave it today.
Thanks for coming on. We appreciate your insights.