Tension between America and China seems to be building up. China said it will curb the export of key computer chip materials as of next month, and the US is rumored to impose restrictions on Chinese companies' access to cloud computing services offered by US companies.
Release of Fed minutes expected today
Yesterday, the United States July 4 national holiday almost totally shut down international markets.
Today markets will wait for the release of the minutes of the most recent Federal Reserve (Fed) meeting, which is expected to reaffirm the hawkish rhetoric voiced by the majority of Fed officials, including chairman Jerome Powell.
Later this week the non-farm payrolls figure will come out and provide additional information for investors.
China and US: Trade issues
The escalating trade tension between the two global economic superpowers is a new factor that is starting to acquire traction in the market.
China has restricted the export of two crucial materials used in the creation of computer chips. Gallium and germanium, which are the two essential products in the creation of microchips, military hardware, and communications, will be subject to unclear export limitations beginning next month, according to a statement from China's Ministry of Commerce.
If the reports are accurate, this choice might have a negative impact on North American and European IT firms, which have been driving the upward trend in recent months.
Also, the US is rumored to be prepared to restrict Chinese enterprises' access to cloud computing services provided by US corporations at the same time.
The technology industry, which includes the corporations with the biggest capitalization in the North American indices, would take a significant hit if both reports are true.
Oil surged on production cut announcement
Oil was one of the few commodities that moved significantly yesterday. After Saudi Arabia and Russia announced additional production curbs amid indications of waning global economic activity, oil prices increased by roughly 1.5% yesterday.
In addition, Russia stated it would reduce its oil shipments by 500,000 bpd. On Monday, Saudi Arabia indicated that it would extend its recently announced one million barrel per day cutbacks through August and maybe beyond.
Oil monthly chart. Sources: Bloomberg, Reuters
Key Takeaways
- Markets waiting for Fed minutes to confirm hawkish rhetoric
- Non-farm payrolls figure on list of events to look for
- China to curb the export of key computer chip materials as of next month
- US said to impose restrictions on Chinese companies' access to cloud computing services
- Technology sector could be caught in the crossfire
- Oil prices surged on news of further production costs
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