Summary:
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European benchmarks drag US peers lower
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Soft EU data weighs on sentiment
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Apple to begin lower as UBS cut price target
The last couple of weeks have been fairly choppy for major indices with markets surging on positive trade headlines and slumping on negative ones. Despite a lot of noise the longer term view remains somewhat clouded as it seems markets are caught between pulling back on the recent US-Sino escalation and shrugging it off. On balance the risks still appear to be greater to the downside and the head and shoulders formation identified earlier this week continues to develop.
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A possible head and shoulders continues to develop for the S&P500 but bears will want to see a clean break below the possible neckline around 2805 before they get their hopes up for a deeper correction. Source: xStation
While news on trade has likely contributed to the weakness seen in equities today, the declines seem more due to another set of disappointing data out of the eurozone. A spokesperson for the Chinese Ministry of Commerce has said that the latest US actions - presumably surrounding the crackdown on Huawei - are preventing negotiations proceeding. Gao Feng earlier said “If the U.S. would like to keep on negotiating it should, with sincerity, adjust its wrong actions. Only then can talks continue,”. More pertinently however is the economic data as we wrote earlier “Preliminary PMIs for May from Germany surprised (once again) to the downside in spite of the fact that the bar was placed quite low. Manufacturing PMI dipped to 44.3 from 44.4 and missed the median estimate of 44.8, whereas services PMI fell to 55 from 55.7 and also missed the consensus of 55.4.”
Apple shares could be worth keeping an eye on at the opening bell, with the market expected to begin lower after a broker downgrade. UBS maintains a “buy” rating but pointed out that Apple is not immune from the US-China trade war as well as weaker smartphone demand globally. With the bulk of Apple’s supply chain in mainland China, the firm is one of the most vulnerable to the trade spat and the stock has already declined by around 7% this month alone. This afternoon the market is called to open lower again, down by around 1.6% and somewhere in the region of 180.
Apple is expected to begin close to a 2-month low this afternoon. The market is threatening to break back below the 38.2-41.4% region after recently moving back below the 200 day SMA. Source: xStation
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