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Major US stock indexes fell moderately, as Washington’s restrictions on the Chinese company Huawei Technologies raised concerns about their negative impact on the technology sector, and also increased trade tensions between the two largest economies in the world.

According to Reuters, Alphabet announced the suspension of business with Huawei in areas that require the transfer of equipment, software and technical services. This was due to the fact that the US Department of Commerce blacklisted Huawei last week, immediately introducing restrictions that would make it very difficult to do business with US companies. Also, manufacturers of Intel Corp. chips will temporarily not work with Huawei. (INTC;), Qualcomm Inc. (QCOM), Broadcom Inc. (AVGO) and Xilinx (XNLX). According to media reports, they will not supply chips to a Chinese manufacturer unless there is an appropriate order from the US authorities.

Apple (AAPL) also had a negative impact on the market, as the iPhone manufacturer’s shares were under pressure after HSBC analysts warned that rising prices for the company's products after raising tariffs could have “dire consequences” for demand.

The focus of market participants was also the statement by Atlanta Fed Chairman Rafael Bostic that he does not expect a rate cut in the current year, contrary to market expectations. He also expressed confidence in the US economy and the position of the Fed on monetary policy.

Most of the components of DOW finished trading in the red (20 of 30). Outsider were shares of Apple Inc. (AAPL, -3.13%). The growth leader was UnitedHealth Group Incorporated (UNH; + 1.91%).

Almost all sectors of the S & P recorded a decline. The largest decline was shown by the technology sector (-1.5%). Only the utility sector grew (+ 0.1%).

At the time of closing:

Dow 25,679.90 -84.10 -0.33%

S & P 500 2,840.23 -19.30 -0.67%

Nasdaq 100 7,702.38 -113.91 -1.46%

Analysts at BNP Paribas say Eurozone’s slowdown is becoming increasingly evident, especially in the German economy, which has suffered from one-off factors but also from a slowdown of exports to China.

• Capacity constraints also play a role. Business climate in the manufacturing sector continues to decline. Italy has now entered a technical recession with quarterly growth negative in the third and fourth quarter of 2018.
• Inflation is now expected to decrease following the past drop in the oil price, while core CPI is hardly moving. The activity slowdown also implies that the pick-up in core inflation should be slower than expected until recently. We do not expect the ECB to move rates this year.

• Businesses are telling him that consumer demand is strong
• No signs strong consumer spending will fall off
• Businesses are saying they are being affected by trade risks
• Repeats that he does not see a rate move in either direction
• December rate hike was not a mistake
• Consumers have growing confidence in their job security

• How organizations hire is important in an increasingly tight labor market
• Algorithmic lending can lead to discrimination in selection

Analysts at BNP Paribas are expecting that the U.S. economic growth to slow to 2.3% this year.

• Trade war uncertainty acts as a drag, the housing market is softening, corporate investment should slow, as well as exports in reaction to the past strengthening of the dollar against a broad range of currencies.
• Core inflation remains well under control and has eased a bit.”
• Following the dovish message from the January FOMC meeting, markets are pricing in a policy easing in the course of 2020.

U.S. stock-index futures tumbled on Monday, as worries about an intensifying fallout from Washington's  crackdown on Huawei weighed on market sentiment.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Tesla (TSLA) target lowered to $230 from $275 at Wedbush

The Chicago Federal Reserve announced on Monday the Chicago Fed national activity index (CFNAI), a weighted average of 85 different economic indicators, came in at -0.45 in April, down from a revised +0.05 in March (originally -0.15), pointing to a decrease in economic growth.

Economists had forecast the index to come in at -0.33 in April.

At the same time, the index’s three-month moving average declined -0.22 in April from -0.16 in March.

According to the report, three of the four broad categories of indicators that make up the index dropped from March, and two of the four categories made negative contributions to the index in April.

The contribution from production-related indicators to the CFNAI moved down to -0.44 in April from -0.04 in March. The contribution of the personal consumption and housing category to the CFNAI decreased to -0.05 in April from a neutral value in March. Meanwhile, the sales, orders, and inventories category made a contribution of +0.01 to the CFNAI in April, down from +0.06 in March. Employment-related indicators contributed +0.04 to the CFNAI in April, up slightly from +0.03 in March.

Rabobank's analysts note USD longs edged lower but they have remained essentially consolidative since the middle of March, according to IMM net speculators’ positioning as at May 14, 2019.  

• Having dropped lower in the November/December period in response to a more dovish outlook for the Fed, USD longs then consolidated for a lengthy period. Another leg lower occurred in mid-March. Better US economic data may support the USD in the next set of data.
• Short EUR positions dropped lower last week breaking the recent trend. Better than expected Q1 Eurozone growth data may have offered some support.
• The level of JPY shorts dropped sharply last week as tension in the market regarding US/China trade talks and Iran continued to lurch higher.
• Net short GBP positions dropped back on hopes for a breakthrough in cross-party Brexit talks remain.
• CHF net shorts remained essentially consolidative. They remain at relatively elevated levels considering the rise of risk aversion in the market.
• CAD net shorts edged higher, breaking the recent trend.
• AUD net shorts increased again ahead of the election and on speculation of a potential June RBA rate cut.

Analysts at BNP Paribas note the news flow for the German economy has definitely improved over the past few months.

• Manufacturing output strengthened for the second consecutive month, although remaining well below last year’s level. Also, industrial orders rose slightly, although falling short of market expectations.
• Even though consumer confidence slightly weakened April, it remained at a very high level. Thanks to the resilience of consumer demand and construction activity, GDP increased by 0.4% in Q1. This was better than expected only a couple of weeks before. However, the decline in the ZEW economic sentiment indicator for May, published last Tuesday, points at sluggish growth in the coming months, as the US-China trade dispute and Brexit continue to weigh on industrial activity.

• Declines to say if he would run for Conservative Party leadership, the focus is to "get on and deliver Brexit"
• Would never advocate a no-deal Brexit
• If U.S. interests are attacked, they will retaliate, and that is something that the Iranians need to think about very, very carefully
• Message to Iran is do not underestimate the resolve on the U.S. side, in this situation the U.S. are not seeking a conflict
• The long term solution to this problem is for Iran to pull back from the destabilizing activities it does throughout the region 

• Would favour fiscal transfers in the Eurozone
• National fiscal buffers may not be enough to accommodate severe common shocks

• Can offer nothing on details or when the bill will be published
• But urges lawmakers to be in favour of the bill
• Says it’s a matter of fact that it can be amended
• Says merits of indicative votes is to be considered by Cabinet on Tuesday

• Additional tariffs between the EU and the U.S. can be avoided

• Economic rebound largely due to one-off factors
• The underlying trend remains weak
• The effects are expected to lapse or even reverse
• Downturn forces continue to be prevalent and may intensify somewhat
• Says that the business environment for automakers could prove to be more challenging in the future

The Westpac's analysts say the main highlight for the Aussie remains Tuesday’s RBA May board meeting’s minutes and the speech by Governor Lowe.

• We are set for another big week in Australian rates markets. Following last week’s rise in the unemployment rate, there is currently a 72% probability of a 25bp rate cut factored in for the RBA’s next Board meeting on June 4.
• Whether the market is too confident or not will largely be resolved by Tuesday afternoon, as the RBA releases the Minutes of its May Board meeting and only a 90 minutes later RBA Governor Lowe will deliver a speech entitled “The Economic Outlook and Monetary Policy” to the Economic Society in Brisbane.
• The market is focused on the fact that the RBA has noted that “a further improvement in the labour market was likely needed for inflation to be consistent with the target.” With unemployment rising from 5.0% to 5.1% and now 5.2%, and underemployment near a record level, the market is convinced that there is sufficient momentum to dash the RBA’s hopes of an improvement.
• Of course, in the communication post the May Board meeting, the Governor also stated that “…the Board will be paying close attention to developments in the labour market at its upcoming meetings”.
• The highlights in both quotes are our own, and the key question is whether the RBA will have lost patience rather than wait for further evidence over the next few months. Presumably, some of that uncertainty will be resolved tomorrow. For now, our own forecast remains for an August rate cut.

According to data collected by Refinitiv analyst David Aurelio, the average expectation is for a first-quarter earnings per share decline of 18% followed by a 9% second-quarter decline.

"Looking forward, analysts expect third-quarter EPS growth of 6.9% for the S&P 600 and 23.3% growth for the fourth quarter, according to Refinitiv’s Aurelio. For small caps to pick up and resume their outperformance we need to see better trends in the economic data in the second half, which would lead to better earnings growth in the third and fourth quarter, which the Street is expecting,” he said.

The ongoing decline in Cable is now facing a potential visit to the 1.2696/62 band, according to Commerzbank’s Senior Technical Analyst Axel Rudolph.

“GBP/USD has fallen below the February low at 1.2772 with the August, October and mid-January lows at 1.2696/62 thus being on the cards. Minor resistance comes in at the 1.2865 April low. Immediate downside pressure will be maintained while no rise above the 200 day moving average at 1.2956 is seen. Next up is the May 10 high at 1.3048. Only if this level were to be exceeded, would we look for the 1.3185/97 April and current May highs as well as the 61.8% Fibonacci retracement to be retested. This currently looks unlikely. The cross will need to regain the 1.3217 January 25 high to introduce scope to the 1.3351/82 resistance area, made up of the February and March highs, where we expect it to struggle”.

Parliament's impasse over Brexit must not be allowed to hold back Britain's financial services, City minister John Glen said on Monday.

The financial sector's traditional strengths were in good health, but the "slow and frustrating" process of seeking a deal on Britain's departure from the European Union remained a shadow, Glen said.

"The City wants and frankly deserves certainty," Glen said. We can't allow the impasse of this parliament to hold the City back."

British households turned more downbeat about their finances in May, according to a survey that hinted at weakness in the consumer economy which has been one of the bright spots for Britain during the Brexit ructions.

IHS Markit said its Household Finance Index (HFI) fell to 42.5 from 43.8, its lowest level since September 2017 as worries grew about job security, particularly in retail and manufacturing.

"Despite the latest labour market data showing historically-low unemployment and reasonably robust wage growth, weak confidence has acted to undermine these trends and led to belt-tightening at UK households," said Joe Hayes, an economist at survey compiler IHS Markit.

Still, households became a little more optimistic about their finances in the coming year, the survey showed.

EUR/USD could return to the 1.15 region in the medium term, suggested Senior Analyst at Danske Bank Aila Mihr.

“EUR/USD will look ahead to Thursday’s release of May’s flash PMIs. We look for a slightly bigger rebound in the Eurozone manufacturing PMI than consensus, which should break the negative trend seen since last summer of EUR/USD plummeting on disappointing flash Eurozone PMIs. In the bigger picture, a US-China trade deal is not in the cards before late Q3 and a recovery in Chinese PMIs not due before Q4. These are important prerequisites for a sustained uptick in EUR/USD. We forecast EUR/USD at 1.12 in 1M, 1.13 in 3M and then rising to 1.15 in 6M”.

According to the report from European Central Bank, the current account of the euro area recorded a surplus of €25 billion in March 2019, a decrease of €3 billion from the previous month (see Chart 1 and Table 1). Surpluses were recorded for goods (€24 billion), services (€8 billion) and primary income (€4 billion). These were partly offset by a deficit for secondary income (€11 billion).

In the 12 months to March 2019, the current account recorded a surplus of €328 billion (2.8% of euro area GDP), compared with a surplus of €376 billion (3.3% of euro area GDP) in the 12 months to March 2018. This decline was driven mainly by smaller surpluses for goods (down from €325 billion to €276 billion) and services (down from €109 billion to €101 billion), and by a larger deficit for secondary income (up from €143 billion to €156 billion). These developments were only partly offset by a larger surplus for primary income (up from €85 billion to €107 billion).

In the financial account, euro area residents made net acquisitions of foreign portfolio investment securities totalling €45 billion in the 12-month period to March 2019 (decreasing from €671 billion in the 12 months to March 2018). Non-residents made net sales of euro area portfolio investment securities totalling €101 billion (in comparison with net purchases of €408 billion).

U.S. Trade Representative Robert Lighthizer will visit Japan on May 24 to meet with Economy Minister Toshimitsu Motegi to accelerate trade talks ahead of a summit meeting scheduled a few days later, two sources with direct knowledge of the plan said on Monday.

After a late-April meeting between President Donald Trump and Prime Minister Shinzo Abe, Trump had said it was possible for the two countries to reach a new bilateral trade deal by the time he visits Tokyo in late May.

On Friday Trump angered foreign automakers by declaring that some imported vehicles and parts posed a national security threat, while delaying a decision for as long as six months on whether to impose tariffs to allow more time for trade talks with the EU and Japan.

Inflation in the euro zone is not at the level the European Central Bank wants it to be, ECB policymaker Klaas Knot.

Euro zone prices rose by 1.7 percent year-on-year in April from 1.4 percent in March. The acceleration offered some mild relief to the ECB, which targets inflation of just below 2 percent in the 19-nation eurozone.

Knot, the Dutch central bank governor, said the current situation was "not full convergence to below but close to 2%, I think. We have a figure in mind that is clearly closer to 2% than the number we have seen over the last five, six years or so. The only thing that we can do is to keep the pressure up, to make sure the economy continues to perform at high levels of capacity utilisation and the economy continues to print GDP numbers in excess of potential growth. At some point this chain of events will also lead to higher prices."

Axel Rudolph, Senior Technical Analyst at Commerzbank, noted EUR/USD could extend the drop to the 1.1110 region.

“EUR/USD continues to come off the 55 day moving average at 1.1243. Failure at the 1.1177 March low on a daily chart closing basis put the 1.1110 April low back on the map. Be advised that as long as 1.1110 holds, though, the pattern being traced out is a potential large bullish reversal pattern. Overhead lie the 55- and 100-day moving averages at 1.1243 and 1.1306 as well as the September-to-May resistance line at 1.1324. Further up meanders the 200 day moving average at 1.1392”.

Oil prices jumped on Monday after Saudi Arabia indicated a possible rollover of output curbs amid political supply risks, but that support is likely to be short-lived due to fundamental changes in the energy industry, an expert said.

“It’s alright to talk about supply-side risks, but that’s sort of near-term ... I don’t think expectations for oil prices have actually gone up,” said Scott Darling, J.P. Morgan’s head of Asia Pacific oil and gas research.

That’s because of the rise of U.S. shale energy and slowing demand due to global economic uncertainties, Darling told. J.P. Morgan expects OPEC to extend its oil output cuts to 2020.

J.P. Morgan’s forecast for Brent crude is $75 per barrel by the end of the second quarter of 2019. For the full year, however, Brent crude will average $71 a barrel for 2019 and will weaken to $60 a barrel from 2021, said Darling.

According to the report from Federal Statistical Office (Destatis). in April 2019 the index of producer prices for industrial products rose by 2.5% compared with the corresponding month of the preceding year. Economists had expected a 2.4% increase. In March 2019 the annual rate of change all over had been 2.4%.

Compared with the preceding month March 2019 the overall index increased by 0.5% in April 2019 (-0.1% in March 2019). Economists had expected a 0.3% increase

In April 2019 the price indices of all main industrial groups increased compared with April 2018. Energy prices, the development of which had the greatest impact on the growth of the overall index, rose by 6.6% (+1.0% compared to March 2019). On an annual basis electricity prices increased by 10.8%, prices of natural gas (distribution) by 6.1% and prices of petroleum products by 5.8%.

The overall index disregarding energy was 1.3% up on April 2018 and 0.3% up compared with March 2019.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1316 (4547)

$1.1279 (3033)

$1.1248 (1519)

Price at time of writing this review: $1.1152

Support levels (open interest**, contracts):

$1.1138 (8257)

$1.1111 (5195)

$1.1076 (3992)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date June, 7 is 119298 contracts (according to data from May, 17) with the maximum number of contracts with strike price $1,1500 (9036);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3016 (1049)

$1.2931 (622)

$1.2861 (327)

Price at time of writing this review: $1.2732

Support levels (open interest**, contracts):

$1.2683 (3678)

$1.2632 (4296)

$1.2599 (1565)

Comments:

- Overall open interest on the CALL options with the expiration date June, 7 is 39494 contracts, with the maximum number of contracts with strike price $1,3450 (3278);

- Overall open interest on the PUT options with the expiration date June, 7 is 38697 contracts, with the maximum number of contracts with strike price $1,2700 (4296);

- The ratio of PUT/CALL was 0.98 versus 0.98 from the previous trading day according to data from May, 17

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.