News analysis: Friday’s global market outlook

In a week that the United States stock markets are taking profits accordingly, the relationship between the world’s two greatest economic giants has heightened.

President Donald Trump prepares to smite China in retaliation for clamping down on Hong Kong.

There’s another flood of data headed by personal consumer expenditures and income, which should mark the cyclical low point of the pandemic, while Fed chair, Jerome Powell, speaks again.

Renault joins Nissan in slashing jobs and capacity, while oil prices are also still struggling after bearish U.S. inventories data on Thursday. Here’s what you need to know in financial markets on Friday, May 29. 

  • China faces Trump’s wrath

President Trump is set to announce new policy measures vis-à-vis China at the end of a week when relations between the world’s two biggest economies have badly strained.

Trump will hold a press briefing, later, on measures that are on the face of its retaliation against Beijing for suspending the autonomy of Hong Kong and allegedly mistreating its Muslim minority in the western state of Xinjiang.

Trump may announce the end of, or changes to, Hong Kong’s trading privileges with the U.S., given that the U.S. has tied these privileges to Beijing’s observation of its promise to abide by the “one country, two systems” arrangement after re-taking control of the former British colony in 1997.

The Hong Kong Hang Seng index fell another 0.7 per cent, but the offshore yuan firmed slightly.

  • Powell speaks after another data dump

U.S. Federal Reserve Chairman Jerome Powell takes the microphone again at 11a.m ET, and may give his two cents’ worth on another stubbornly initial jobless claims number on Thursday.

The market preferred to focus on the drop in continuing claims that pointed to at least a modest revival in hiring, so there’ll be a lot of focus on how much he encourages that tendency – or not.

The stream of hard data from the U.S. economy continues on Friday with the release of personal income and spending data for April at 8:30a.m. ET.

There will also be a first reading for May’s University of Michigan consumer sentiment index at 10a.m. ET. The Conference Board’s index earlier this week showed an underwhelming bounce from what is likely to have been the cyclical low in April.

  • Stocks set to open lower on profit-taking

U.S. stocks were set to open lower on Friday, as bulls drew in their horns at the end of a strong week, wary of keeping long positions open ahead of a weekend that may contain some unpleasant political risks.

By 6:30a.m. ET (10:30 GMT), the Dow Jones 30 Futures contract was down 83 points or 0.3 per cent, while the S&P 500 Futures contract was down 0.2 per cent and the Nasdaq 100 Futures contract was down 0.2 per cent.

Facebook and Twitter stocks were again in focus after President Trump signed his promised executive order that aims to allow federal regulators to hold companies liable for perceived restrictions on free speech. The order, which was criticised by Facebook, Twitter and Google, is likely to draw a number of legal challenges.

Also in the spotlight are Salesforce, VMware and Dell, which all posted better-than-expected results after the bell on Thursday, and Ulta Beauty, which slumped to an unexpected loss in its latest quarter.

  • Renault, Nissan slash capacity, VW bets on China, EVs

The global car industry is taking ever more severe measures to stay afloat. French auto giant, Renault SA, said on Friday it would cut nearly 15,000 jobs, of which nearly 5,000 will be in tightly regulated domestic market.

It has appeased the French government, its biggest shareholder, by freezing plans to roll out capacity expansions in cheaper locations such as Romania and Morocco. Overall, it is cutting capacity by some 20 per cent.

The measures came a day after its global alliance partner, Nissan Motor, announced similar cost-cutting measures, including the closure of a large plant in Barcelona, Spain.

Elsewhere, Germany’s Volkswagen upped its bets on China and on Electric Vehicles. It’s spending $1.1bn to raise its stake in a joint venture with EV-maker, JAC, to 75 per cent from 50 per cent, and spending another $1.1bn on a stake in a local battery manufacturer.

Oil still struggling after inventory data

Oil prices are also consolidating after two weeks of solid gains, amid concerns that the rally may have gone too far, too fast.

The shock rise in U.S. oil stocks, confirmed by government data on Thursday, have underlined how far below year-earlier levels demand still is, as well as reviving doubts about output discipline by suppliers.

A large part of the rise in inventories last week was due to imports, notably from Saudi Arabia.

By 6.30a.m., U.S. crude futures were down 3.8 per cent at $32.42 a barrel, while Brent futures were down two per cent at $35.02.

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