Wall Street suspends activities as US-China trade negotiations take center stage
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Wall Street's Cautious Start
The commencement of US-China trade discussions left Wall Street largely unfazed on Monday. The Dow Jones Index, a collection of major US blue-chip stocks, ended flat at 42,761 points. The high-tech-focused Nasdaq ticked up 0.3% to 19,591 points, while the broad-based S&P 500 edged higher by 0.1% at 6,005 points.
Trade negotiations commenced Monday afternoon and are anticipated to continue into Tuesday. Rare earths are the key topic of interest for the US, with China yet to comment. According to Peter Cardillo, chief economist at financial services firm Spartan, "There'll be a compromise deal, at least a deal. That'll alleviate some of the uncertainty surrounding tariffs."
Gains for Chipmakers
Monday's trading saw chip stocks emerge as a notable winner. Qualcomm and AMD each climbed by around 4%. Kim Forrest, founder of investment advisory firm Bokeh Capital Partners, explains, "China's investments in AI could stand to benefit the sector if other countries are given the green light to resume supply to China."
Dollar Weakens, Gold Shines
Asian stock markets opened positively before the negotiations, with China's strategically significant rare earth sector experiencing particular gains. These metals, used in industries such as smartphone and electric motor production, are predominantly supplied by China.
However, the US dollar weakened during the day, with the dollar index dropping 0.2% to 98.973 points. Simultaneously, the gold price increased by 0.5% to $3,327 per troy ounce. UBS analyst Giovanni Staunovo notes that ongoing concerns over trade tensions, debt, and weak economic growth will likely persist, bolstering gold's appeal in uncertain times.
Chinese Growth Woes
China's export growth slowed significantly in May, reflecting increased trade conflict with the US. Imports also fell more steeply than expected. Portfolio manager Thomas Altmann of asset manager QC Partners observes, "US imports were at their lowest level since 2020." Additionally, deflation deepened at the producer level, hinting at challenges facing the Chinese economy due to trade conflict with the US and a persisting slowdown in the real estate sector.
Aviation Sector Soars, Robinhood Dips, Apple Falls
Elsewhere in the market, new US decrees in the aviation sector propelled shares of flying taxi developers. Joby Aviation and Archer Aviation each rose by more than 10%. Conversely, Robinhood declined by nearly 2% after missing out on inclusion in the S&P 500. Apple suffered a setback of 1.2%, with analysts citing a lack of innovation in the realm of artificial intelligence at its annual developer conference.
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- The Commission, being part of the EU, has also been involved in the preparation of the draft budget for the European Union, which includes sectors like finance, technology, and general-news, since these areas may potentially influence the EU's overall economic performance.
- As the trade negotiations between the USA and China unfold, investors are closely watching the potential impact on businesses, particularly those involved in rare earths, a key topic of interest for the US, due to their use in various technology-intensive industries.
- Despite positive gains in the aviation sector due to new decrees in the USA, the technology sector witnessed mixed fortunes on Wall Street, with Robinhood dipping slightly after missing out on inclusion in the S&P 500, while Apple faced a setback due to perceived lack of innovation in artificial intelligence.
