Wall Street deepens decline as consumer confidence deteriorates

Summary:
- Consumer confidence and housing market data disappoints
- Dow Jones (US30) tests support level at 26650 pts
- AbbVie (ABBV.US) is said to be pursuing merger with Allergan (AGN.US)

Moods on the global stock exchanges are sour on Tuesday and situation is no different on Wall Street. All three major US indices launched today’s trading lower and a pack of the disappointing US data released at 3:00 pm BST did little to change the sentiment.

CB consumer sentiment index dipped in June to the lowest level since Q3 2017 and exerted more pressure on the USD. Apart from that, the second consecutive drop in the new home sales does little to cheer market participants. Source: Macrobond, XTB Research

A range of second-tier US data was released at 3:00 pm BST. The Conference Board Consumer Confidence for June took a major dive from 134.1 pts to 121.5 pts while the market expected a decline to just 131 pts. Both, the present situation and expectations subindices deteriorated with the latter experiencing a bigger drop. The housing market data released simultaneously disappointed as well. New home sales reached 626k in May while the market expected a print of 684k. This marks quite a significant drop from the previous month’s 679k (revised higher from 673k). Note that it was the weakest print of the year. The third piece of news that was released at 3:00 pm BST - Richmond manufacturing index - was the only one to see better-than-expect reading. The index was expected to move from 5 pts in May to 2 pts in June while the actual reading showed 3 pts. As one could expect EURUSD moved sharply higher on the news. The main currency pair is trading back near the 1.14 handle at press time.

S&P 500 movers at 3:12 pm BST. Source: Bloomberg

Company News

FedEx (FDX.US) continues to be pressured by the ongoing US-China trade spat. The US courier may be included in the Chinese list of “unreliable firms”. A move is a result of FedEx’s failure to deliver Huawei packages properly. According to the reports, Huawei asked FedEx to ship documents from Japan to China but the US firm shipped them to the United States instead. However, the Trump-Xi meeting at the G20 summit in Japan later this week may provide some relief for shares of companies hurt by the Trade War. Of course, in case the two leaders do not escalate the conflict further. FedEx is among 5 worst performing S&P 500 (US500) members.

According to the - yet unconfirmed - Wall Street Journal report, AbbVie (ABBV.US), the US biotechnological company, is set to acquire Allergan (AGN.US), the Irish-headquatered pharmaceutical company, for $188 a share (around $63 billion in total). The offer represent 45% premium to yesterday’s closing price. The two companies had combined sales of over $48 billion in 2018. Along with acquisition of Allergan, AbbVie will take control of its strong portfolio of botox-products. Allergan is trading 27% higher while AbbVie takes a dive of around 15%.

The Government Pension Fund Global, one of the two sovereign funds of Norway, made some changes to its investment restrictions list. Walmart (WMT.US), General Dynamics (GD.US), Rio Tinto (RIO.UK and RIO.US) and Nutrien (NTR.US) have been removed from the list. The fund was barred from investing in the aforementioned stocks on the ethical or environmental grounds. The Norwegian sovereign wealth fund manages over $1 trillion in assets. The announcement does not mean that the Fund will now rush to buy shares of these companies but hints at potential strong demand in the future.

Dow Jones (US30) is the only one out of 3 major US indices that failed to print new highs during the second quarter of 2019. The index reversed slightly below last year’s peak of 26960 pts. US30 is currently testing the support level marked by a double top from April (26650 pts). Daily close below this hurdle could encourage bears to become more active and, in turn, deepen the decline. In such a scenario the next support to watch is the 26100-26250 pts zone. Source: xStation5

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