Market snapshot: investors face distractions all round

US markets descended from their recent highs as investors gave the thumbs down to the latest round of tariff threats.

Optimism was predicated on hopes that the worst of the trade tensions had passed, giving relief to global economic prospects and with limited damage visible thus far on the measures already taken. This is now being tested again as the President confirmed that several letters had been sent to countries where there is a trade imbalance, most notably with the likes of Japan, South Korea and South Africa.

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At the same time, the “BRICS” stable also remains in the sights of the White House with additional 10% tariffs possible, although further details are currently patchy. The latest developments had a negative impact across the board, with weakness across the mega cap technology sector and losses of between 4% and 7% for the US-listed shares of Toyota Motor Corp ADR (NYSE:TM), Nissan and Honda Motor Co Ltd ADR (NYSE:HMC).

Elsewhere, with the door of friendship between the President and Elon Musk now slammed shut, Tesla Inc (NASDAQ:TSLA) shares slumped by almost 7% as the latter revealed plans to launch a rival “America Party” in opposition to the recent tax bill. His previous foray into the world of politics was not well received by investors given the inevitable distraction from his Tesla duties, and sales have also fallen sharply with the brand apparently damaged by his actions.

The further extension of the tariff deadline serves only to kick the can down the road. The fact remains that there will be some economic imbalances which could be far reaching, and investors are likely to remain skittish until such time as the clouds clear.

That said, the main indices are now coming from a position of strength, although some investors are beginning to harbour thoughts of whether the market is unduly optimistic in its reading of the current position. Even so, in the year to date, gains of 4.4%, 5.7% and 5.9% for the Dow Jones, Nasdaq and S&P500 respectively leave the bulls in prime position for the time being.

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Asian markets were surprisingly unperturbed by the latest turn of events, with investors apparently opting to take a glass half-full approach. The fact that the President had intimated that even the latest deadline was not “100% firm” was enough to prompt a muted rally as hopes emerged that the extension was equivalent to opening the floor to further dialogue before the tariffs finally bite.

UK investors were rather less convinced, with the main indices largely flat in opening exchanges. The most recent recovery of the dollar has also been a headwind, given that the index constituents of the FTSE100 are for the most part reliant on overseas earnings, with a particular bias to the US.

Nonetheless the premier index remains ahead by almost 8% in the year to date and just 0.8% from its own record high in what has been a show of strength as global investors have sought more stable investment destinations.

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Entain (LSE:ENT) was an early feature after a broker upgrade which leaves the shares up by more than 36% this year alone. The group’s gamble to conquer overseas markets in addition to its core UK offering is showing signs of paying off, with potentially the largest target of all exhibiting particular promise. Its joint venture with BetMGM has recently become earnings positive, although it has been a tough slog for the group to get to this stage, where promotional investment has been something of a necessary headwind.