Wall Street leaded by Powell and trade tensions


© Reuters. WALL STREET ENDS SHARPLY LOWER

by Caroline Valetkevitch

NEW YORK (Reuters) – Wall Street ended the last session of the week in sharp decline, with losses of more than 2% for its three main indices, the victim once again of the confrontation between the United States and China through trade, and also of the recent statements of the president of the federal Reserve, which have helped to aggravate its losses.

It is likely that the federal Reserve should continue to raise interest rates to control inflation, said on Friday Jerome Powell, on the occasion of a demonstration in Chicago, speaking for the first time on the economic outlook.

The us president, Donald Trump had announced on Thursday that he had instructed the delegate to the Trade to prepare for the implementation of the rights of an additional duty on $ 100 billion of chinese goods more, leading Beijing to threaten Washington of retaliation.

The Dow Jones has lost 574,46 points (2,34%) 23.930,76 points. The S&P-500 has sold then 58,37 points (2,19%) 2.604,47 points. The Nasdaq Composite dropped 161,44 points (2,28%) 6.915,11 points.

The S&P-500 finished just above its 200-day moving average after having pressed this threshold, which is closely followed by technical analysts.

Throughout the week, the Dow has surrendered 0.7 percent, the S&P 1.4% and the Nasdaq up 2.1 per cent.

The 11 major sectoral indices of the S&P finished in the red, in particular the one of the values high techs, which loose of 2.53%, and industrial, which gives up 2,73%. The index of the semiconductor of the stock Exchange of Philadelphia has sold 3.1 per cent; this particular group of values is required to China in the quarter to approximately of its revenues.

“The market will not react so negative to all of the new in general if it was not already in a situation of vulnerability,” said Jim Paulsen (The Leuthold Group).

“The valuations have increased, the liquidity of financial contracts and dealt with the year being a little too optimistic; moreover, the rates rise and inflation is increasingly fear”.

Also, it seems that investors wanted to reduce their risk ahead of the weekend.

“When the market is retrograde, it has the tendency to accelerate on Friday; investors don’t want to take the risk to come back on Monday with something that would have happened during the weekend,” said Rick Meckler (LibertyView Capital Management).

BRIEF LULL

The recent statements by Larry Kudlow, the chief economic adviser to the White House, following which negotiations are continuing between the two countries and a statistics of employment in the semi-shade, soothing only in appearance to that of the evolution of interest rates, have allowed a moment to Wall Street to reduce its losses.

But the lull was short-lived and the decline is faster after the intervention of the chairman of the Fed even if Kudlow has even said later that the trade dispute between the United States and China could be wiped out in three months, adding that it was necessary to take seriously the threats the customs of Donald Trump.

Job creation in the United States have been in march, the lowest in six months, but the acceleration of the increase in the hourly wage goes in the direction of a continuous tightening of the labour market could prompt the federal Reserve to continue raising interest rates this year.

So far, the annual increase of 2,7% of the average hourly wage is below the 3% necessary, in the opinion of the economists, so as to bring inflation toward the Fed’s goal, which is a rate of 2%.

The volume was 7.2 billion shares traded, not far from the average of the past 20 sessions $ 7.3 billion.

The commercial litigation of the two giants, and the statistics of employment have weighed on the dollar, which has hardly benefited from the recent statements of Jerome Powell.

And if they do not have perked up the greenback, it is because “the foreign exchange market is more focused on the trade dispute with China, which is much greater risk to roll over the us growth, if we think about the consequences for the economy,” explained Juan Perez (Tempus Consulting).

The drop in the dollar has benefited in particular the yen and the swiss franc, two currencies, sought after in troubled times, but also to the euro, while the dollar index fell to him of 0.4%.

On the other hand, trade tensions have had the effect of driving up the bond market, as employment figures, which do not meet the expectations.

The benchmark bond 10-year gained 13/32 and yielded a return of 2,784%, compared to 2,832% on Thursday, following the trend of its european equivalent, the Bund to 10 years.

(With Herbert Lash and Sinead Carew in New York, Sruthi Shankar in Bangalore; Gertrude Chavez-Dreyfuss and Karen Brettell in New York)

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