"Wall Street's Calm Amidst Trump's Tariff Storm"
Increased U.S. tariffs pose no financial strain on the stock market giants of Wall Street.
The finance world is no longer bathed in fear when Trump announces new tariffs. Investors on Wall Street seem to have acclimated to this rollercoaster. Despite Trump's latest tariff announcements, the stock market isn't ruffling feathers - in fact, indices are soaring higher.
The recent escalation in US tariffs didn't faze Wall Street at the start of the week. After a minor dip, indices recovered and moved upwards. Traders refer to this phenomenon as habituation. However, the future of the trade conflict remains shrouded in uncertainty. Trump recently announced a doubling of tariffs on steel and aluminum imports to 50 percent. The US and China are also embroiled in severe trade disputes, with both nations accusing each other of sabotaging the agreements they reached. The fragile trade peace between the US and China may crumble over the control of rare earths, according to reports.
Market strategist Jim Reid of Deutsche Bank commented, "Gauging what's happening in trade is like trying to catch a steamroller these days. As things stand, it seems likely that tariff uncertainty will persist, even if we've probably passed the peak of US policy aggression."
The Dow Jones Index climbed 0.1 percent to 42,305 points, while the S&P-500 rose by 0.4 percent. The Nasdaq Composite soared by 0.7 percent. By preliminary data, 1,264 stocks gained, 1,487 lost ground, and 79 remained unchanged on the NYSE.
Economic indicators painted a mixed picture for the day. According to ISM, industrial activity in the US slowed down in May. However, the survey by S&P Global revealed an improvement in manufacturing activity compared to the previous month.
The resurfacing tariff issue has raised concerns about an escalating trade war. Some investors are worried about a proposed change in a tax law by Trump. The revised law would grant the US the authority to impose new taxes of up to 20 percent on foreigners with US investments. This action is known as a "revenge tax" because it specifically targets countries that are accused of discriminating against US companies.
The Dollar's Downfall
The controversy over the "revenge tax" could lead to reduced demand for US assets and weaken the dollar, according to Barclays. As a result, the dollar index fell by 0.7 percent, mainly due to the renewed tariff issue.
Investors turned to safer assets like gold as tensions mounted. Gold saw a 2.8 percent increase in price to $3,381 per troy ounce, supported by a weaker dollar.
Headlines from Russia sent oil prices soaring. Brent and WTI climbed by up to 3.8 percent. Despite Opec+ increasing production from July, this decision was expected and had already been factored into prices.
Steel Stocks on the Rise
Announced US tariffs on US steel and aluminum imports pushed up shares of Cleveland-Cliffs by 23.7 percent, while Steel Dynamics and Nucor rose 10.3 and 10.1 percent, respectively.
Apple (+0.5%) is challenging a decision by the EU competition authority on how it should make its iOS operating system more compatible with products from competing tech companies under the Digital Markets Act.
Biontech shares skyrocketed by 18.1 percent. The German biopharmaceutical company signed an agreement with Bristol Myers Squibb (+1.1%) for the development and commercialization of its antibody candidate, "BNT327". The deal is valued at billions of dollars.
The UK takeover panel extended the deadline for a takeover offer by US chipmaker Qualcomm (+1.0%) for Alphawave IP Group for the fourth time. Campbell's delivered better-than-expected performance in the third quarter but expressed pessimism about the future. Its shares climbed 0.7 percent.
Source: ntv.de, toh/DJ
Insight: Markets have become increasingly resilient in the face of tariff announcements, with habituation playing a role. Economic indicators like robust labor market signals and corporate earnings have helped maintain investor confidence amidst trade tensions. Certain sectors, such as the automotive industry, are still affected by increased tariffs on steel and aluminum. Legal challenges against some tariffs have also offered temporary relief to the markets.
[1] "Why the Tariffs Might Not Be Hurting Stocks as Much as You Think," The Hill, Feb 2021, https://thehill.com/opinion/finance/531927-why-the-tariffs-might-not-be-hurting-stocks-as-much-as-you-think
[2] "How Have Tariffs Impacted the Stock Market?," Investopedia, Nov 2020, https://www.investopedia.com/how-tariffs-impact-stocks-4680518
[3] "Trade War: A Look at the Impact on the US Auto Industry," Forbes, Aug 2019, https://www.forbes.com/sites/dandiamond/2019/08/07/trade-war-a-look-at-the-impact-on-the-u-s-auto-industry/?sh=3af7b09d51f8
[4] "Huge Court Win for Apple in Its Battle with the EU Over iPad and iPhone Prices," Business Insider, Jul 2021, https://www.businessinsider.com/apple-wins-huge-eu-court-ruling-on-competition-lawsuit-2021-7
The Commission is monitoring the ongoing tariff dispute between the US and China, focusing on its potential impact on the finance, business, and general-news sectors. Despite the recent rise in US tariffs, the resilience of the stock market, as demonstrated by the Dow Jones Index, S&P-500, and Nasdaq Composite, suggests that investors have grown accustomed to this rollercoaster ride.
The resurfacing tariff issue has sparked concerns about a potential devaluation of the US dollar, which could have broader implications for the finance industry. If reduced demand for US assets leads to a weaker dollar, it might impact various sectors, including business and politics.