Escalating Tariffs on China Spark a Major Selloff in Tech Stocks!

• Investors expect the European Central Bank to keep interest rates at 4.25%.
• US confirms new sanctions against China primarily aimed at semiconductors applying significant pressure on Tech Stocks.
• The NASDAQ trades more than 4% lower than its recent highs. Investors reduce their involvement in growth stocks as top economists predict a decline in consumer demand.
• The top 10 most influential stocks for the NASDAQ fell an average of 3.97% on Wednesday. Netflix due to release their earnings report today after market close.

USA100 – Tariffs Intensify Against China Triggering A Tech-Stocks Selloff!

On Wednesday, the NASDAQ fell a total of 2.82% and is trading 4.25% lower than its recent highs. The reason behind the quick selloff is twofold. At first the NASDAQ saw lower demand as leading bankers and economists signalled weaker consumer demand from the lower income portion of the economy. The second is the United States decision to intensify sanctions on chips being sold to China. As a result, the semiconductor sector took a big hit and had a domino effect on the rest of the technology market.

The Semiconductor selloff seen yesterday was the biggest in four years, but investors also should note that at some point a lower price can trigger investors to buy the dip. Though the question remains as to when that is likely to happen.  After the market close, in after trading hours, most of the semiconductor sector rose in value, but still remain significantly lower than the open price.

Investor willingness to purchase the dip will also depend on earnings data which will start this evening. Netflix is due to release their quarterly earnings report after market close. Analysts expect the company’s earnings per share to rise from $4.54 to $4.76 and for revenue to increase by 25 million. Netflix’s stock fell less than other components during yesterday’s decline which can be perceived as a positive. However, the price action will depend on tonight’s reports.

Investors are only likely to enter at the discounted price if earnings data from the most influential companies beat expectations and cool down concern over consumer demand. The most influential day for earnings will be next Tuesday where Microsoft, Alphabet (Google), Tesla and Visa release their reports. Whereas, if earnings are not able to increase demand, the sanctions imposed have the ability to reduce sentiment towards the sector for a prolonged period.

Currently, the price of the NASDAQ trades lower than most Moving Averages and lower than the neutral on the RSI. However, the price is retracing upwards. Therefore, investors will monitor whether the price will attempt a correction or decline further. If the price falls below $19,879.33, momentum indicators are likely to signal a decline, whereas above $20,100 will bring the price above the trend line which can indicate an attempted correction to $20,405.

EURGBP – UK Adds High Number Of Unemployment Claims!

The price of the EURGBP increased in value after the UK’s Claimant Claims rose by 32,300, almost 10,000 more than analysts’ expectations. Over the past two months the UK has added 82,600 more unemployed individuals. As a result, the Bank of England may be more tempted to decrease interest rates at the next meeting but according to analysts this is not yet certain.

Nonetheless, the price has increased 0.11% and risen above the 75-Period Moving Average on the 2-hour chart. If the price rises above 0.84145, the exchange rate potentially will maintain a buy signal. This will also depend on today’s ECB Rate Decision and Press Conference. Analysts expect the rate to remain at 4.25% but are hoping for guidance on when the next cut is likely.

Michalis Efthymiou

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.