NY Open: Wall Street chilled by Chinese cold front

Equities 4 minutes to read

Michael O’Neill

FX Trader, Loonieviews.net

Summary: US shares are in the red today with Caterpillar and Nvidia leading the charge lower.

The temporary end to the US government shutdown may have brought civil servants in from the cold, but not Wall Street traders. They are getting a frosty reception from China. More accurately, from American companies with substantial interests in China.

Caterpillar (CAT: NYSE) is getting skinned in early trading after the company’s earnings and forward guidance disappointed analysts. CAT earnings per share of $2.55 fell short of expectations of $2.98 and 2019 forward guidance also disappointed, due to lower than expected demand from China. CAT shares dropped 8.0% as of 14:00 GMT.

China was also blamed for NVIDIA (NVDA: NASDAQ) cutting its Q4 revenue guidance to $2.20 billion from $2.70bn, and it doesn’t even report earnings until February 14. NVDA plunged 15.5% in early trading.

The China and Nvidia reports spooked the rest of Wall Street and sparked a broad sell-off in equities. The three major US indices were deep in the red by 14:00 GMT.
USDCAD is the biggest gainer since the New York open, climbing steadily from 1.3225 to 1.3282, supported by the ongoing drop in oil prices. WTI fell from $52.69 to $51.93/barrel during that period; AUDUSD and NZDUSD are only marginally lower.

EURUSD is a tad higher after bouncing around in a 1.1404-1.1428 range. Prices managed to squeeze higher even after European Central bank president Mario Draghi repeated that weak data underscores the need for stimulus. GBPUSD managed to hold on to overnight gains and as of 14:00 GMT, is unchanged.

WTI oil prices snapped a month-long rally when they dropped below $52.50/barrel this morning. A decisive break below $51.80 targets further losses to $50.55/b. Sellers emerged after Saudi Arabian oil minister Khalid al-Falih said the Venezuela oil crisis is not affecting the oil market. Caution around the US/China trade talks also undermined prices.

Outrageous Predictions 2023: The War Economy

Billionaire coalition creates trillion-dollar Manhattan Project for energy
The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
Read article
French President Macron resigns
The political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Read article
Gold rockets to USD 3,000 as central banks fail on inflation mandate
As markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
Read article
EU Army forces EU down path to full union
With continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
Read article
A country agrees to ban all meat production by 2030
In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
Read article
UK holds UnBrexit referendum
Following a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Read article
Widespread price controls are introduced to cap official inflation
History tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
Read article
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve asset
Sanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
Read article
USDJPY fixed to the USD at 200 as Japan overhauls financial system
Following the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Read article
Tax haven ban kills private equity
With the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.
Read article