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Wall Street fell considerably over the prospect of the United States potentially imposing restrictions on Chinese telecommunications companies — stoking investors' concerns about worsening US-China trade relations.
Markets at 7:20am (AEST):
- ASX SPI 200 futures +0.1pc, ASX 200 (Wednesday close) +0.6pc to 6,050.
- AUD: 74.94 US cents, 55.17 British pence, 62.67 Euro cents, 82.3 Japanese yen, $NZ1.07
- US: Dow Jones -0.7pc at 23,925, S&P 500 -0.7pc at 2,636, Nasdaq -0.4pc at 7,101
- Europe: FTSE +0.3pc at 7,543, DAX +1.5pc at 12,802, Euro Stoxx 50 +0.5pc at 3,554
- Commodities: Brent crude -0.1pc at $US73.07/barrel, spot gold +0.1pc at $US1,304.46/ounce
Restricting China's telcos
The Trump administration is considering issuing an executive order that would restrict some Chinese companies' ability to sell telecommunications equipment in the United States, two industry officials told Reuters.
The most likely targets are Huawei Technologies and ZTE Corp.
President Donald Trump's administration has already targeted Huawei and ZTE, two of the world's major telecommunications equipment manufacturers, with a number of recent actions to restrict their businesses in the United States based on national security concerns.
The news, reported earlier by the Wall Street Journal, came as Washington despatched a team to Beijing headed by Treasury Secretary Steve Mnuchin to hold talks over an ever-worsening economic relationship with China.
Mr Trump has previously threatened to impose tariffs on up to $US150 billion of Chinese imports, a move that investors worry could trigger a trade war between the world's two largest economies.
US lawmakers and the Trump administration have pressured US companies, like AT&T, to not sell Huawei or ZTE products, saying they potentially could be used to spy on Americans.
"While we have no comment on individual actions, protecting critical infrastructure, including the supply chains associated with such infrastructure, is a critical part of protecting America's national security and public safety," a White House National Security Council spokesman said.
Representatives of Huawei and ZTE could not be reached immediately for comment on the possible executive action, though both have denied allegations their products are used to spy.
"It's hard to see investors willing to take increasing risk ahead of a couple more weeks of trade discussions and negotiations to come," said Matthew Miskin, market strategist at John Hancock Investments in Boston.
US markets in the red
The major US indexes briefly posted gains after the Federal Reserve unanimously decided to leave interest rates unchanged (at 1.5 to 1.75 per cent) overnight, in a widely predicted decision.
But the market gave up those gains in reaction to concerns about the potential US restrictions on Chinese telcos.
The Fed expressed a confident outlook for the American economy, and said it expects inflation to run close to its 2 per cent target.
It also downplayed a recent slowdown in economic and job growth, saying activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months.
The Fed raised rates in March and currently forecasts another two increases this year, although an increasing number of policymakers see three as possible.
The market overwhelmingly expects the next rate hike to happen at the Fed's next meeting on June 12-13.
Wall Street in the red
The Dow Jones index dropped 174 points, or 0.7 per cent, to 23,925. The S&P 500 lost 0.7 per cent, and the tech-heavy Nasdaq slipped 0.4 per cent.
Most US sectors finished in the red, with consumer staples, healthcare and telecommunications being the worst performers.
Apple rose by almost 4.5 per cent after it announced a strong profit and solid iPhone sales after yesterday's market close.
On the other end of the spectrum was Snap, which is known for its app Snapchat. Snap shares plunged 22 per cent after it significantly missed revenue estimates, posted a disappointing quarterly profit.
Australian market today
ASX futures are up 9 points, which points to a slightly higher open for the Australian share market.
In economic news, the Bureau of Statistics will release its latest building approvals and trade balance figures today.
The Australian dollar is buying about 74.9 US cents, 55.2 British pence and 26.7 Euro cents.
More to come.
Topics: stockmarket, business-economics-and-finance, markets, economic-trends, company-news, currency, australia, united-states
First posted