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  • Dow Jones Industrial Average lost 147.63 points, or 0.6%, at 25,400.64.
  • The S&P 500 index ended off 0.2% at 3,029.73.
  • Nasdaq Composite Index dropped 0.5% at 9,368.99.

Wall Street’s benchmarks took a late session knock on the announcement that US President Donald Trump would hold a news conference on Friday pertaining to Chinese relations and the latest developments surrounding Hong Kong. Investors have been dreading this day all week, the day when China and the US trade war was officially is the dominate theme again. 

Trade deal negotiations that got underway under Trump’s administration which had labelled China a “strategic competitor” started with the 2017 National Security Strategy. Subsequent trade wars roiled markets throughout 2018 until a phase 1 deal was finally agreed at the end of 2019. Stock markets had started to recover on the deal until COVID-19.

US Pres. Trump to hold China news conference on Friday, risk-off themes will be in play

However, the latest news that China was threatening the autonomy of Hong Kong sent shivers down the spine of financial markets at the start of this week. A return to the possible consequences of which could have highly adverse ramifications surfaced again and has been casting a dark cloud over the relentless bids. Today’s announcements, though, seems as if the chickens are finally coming home to roost. 

Consequently, the Dow Jones Industrial Average lost 147.63 points, or 0.6%, at 25,400.64, well below the high of the day at 25,758.79. The S&P 500 index ended off 0.2% at 3,029.73 and the Nasdaq Composite Index dropped 0.5% at 9,368.99.

For the majority of the week, however, bulls have been trying to stay the course and through a possible fear of missing out, speculators have been buying the dips. Confidence was being installed with developed nations opening their economies again and a V-shaped recovery has been projected on anticipated demand. 

Friday will be a huge test for the bull’s commitments and we have already seen the weaker hands pulling the plug. 

Key notes 

  •  China’s plan of national security law in Hong Kong puts Trump in an unwelcome spot with Xi 
  •  The Hong Kong Dollar, the next black swan?
  •  Chart of the Week analysis – AUD/JPY
  • How do experts view financial conflict of top two economies? – The Global Times

US initial and continuing claims fall but still high

Analysts at ANZ Bank explained that US continuing claims in the week ending 16 May fell for the first time since the shock.

Even so they still stand at 21.1 million people. Initial claims were 2.12m (exp: 2.1m, prev: 2.4m). Next week’s May payrolls report is expected to show the unemployment rate rising to 19.5% (Bloomberg consensus). April durable goods orders fell 17.2% (exp: -19%, prev: -16.6%). The bulk of the weakness came from transportation categories, with the vehicle sector taking 12% from the headline figure. April pending home sales dropped 21.8% m/m (exp: 17.3%, prev: -20.8%). All regions saw declines of more than 15% m/m, with the biggest fall occurring in the Northeast.

DJIA levels