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Top 5 Things to Know in the Market on Tuesday, August 4th

(C) Reuters.

By Peter Nurse — Rhetoric surrounding the potential purchase of TikTok has become heated with President Trump claiming the U.S. government wants its share, while the World Health Organisation expressed doubts about the possibility of a vaccine for the Covid-19 virus. Wall Street is set for a negative start, while Apple (NASDAQ:AAPL) is one the verge of another record. BP (NYSE:BP) and Nikola (NASDAQ:NKLA) are other stocks to focus on at the start of trading Here’s what you need to know in financial markets on Tuesday, August 4th.

1. Rhetoric surrounding TikTok becomes toxic

The tone of the conversation surrounding the potential purchase of Tik Tok’s U.S. operations by Microsoft (NASDAQ:MSFT) is becoming more and more belligerent, with the move threatening to become the precursor to a larger tech war.

Microsoft said on Monday it was in talks — reports Tuesday suggested there are other interested parties — with ByteDance to buy parts of TikTok after U.S. President Donald Trump reversed course on a plan to ban the video-sharing app on national security grounds and gave the firms 45 days to strike a deal.

President Trump also noted Monday that the U.S. government should get a “substantial” cut of the sales price of the U.S. operations of the company, although it’s unclear how that would occur.

This prompted a scathing response in the state-backed China Daily newspaper, with its editorial saying that China will not accept the “theft” of a Chinese technology company.

It added that the United States’ “bullying” of Chinese tech companies was a consequence of Washington’s zero-sum vision of “American first” and left China no choice but “submission or mortal combat in the tech realm”, and that China had “plenty of ways to respond if the administration carries out its planned smash and grab.”

It’s unclear what moves China has to respond, but watch this space.

2. Covid-19 “silver bullet” may never happen – WHO

The Covid-19 outbreak is showing signs of stalling in the U.S., with new cases falling below 50,000 for the second day in a row and the number of deaths dropping below one thousand a day.

That said, the U.S. government’s top infectious disease expert, Dr. Anthony Fauci, on Monday said states with high coronavirus case counts should reconsider imposing lockdown restrictions, emphasizing the need to get cases to a low baseline before the fall flu season.

Additionally, senior figures at the World Health Organization warned on Monday that the road to normality would be long, and countries had to accept there might never be a “silver bullet” for Covid-19 in the form of a perfect vaccine.

“A number of vaccines are now in phase three clinical trials and we all hope to have a number of effective vaccines that can help prevent people from infection. However, there’s no silver bullet at the moment – and there might never be,” said WHO Director-General Tedros Adhanom Ghebreyesus Monday.

Elsewhere, U.N. Secretary-General Antonio Guterres warned earlier Tuesday that the world faces a “generational catastrophe” because of school closures amid the coronavirus pandemic and said that getting students safely back to the classroom must be “a top priority.”

3. Apple helps tech sector soar

U.S. stock markets are seen opening a touch lower Tuesday, consolidating after more strong gains Monday, led by the tech-heavy Nasdaq index which posted another record close.

By 6:30 AM (1030 GMT), the Dow futures contract was down 44 points or 0.2%, while the S&P 500 futures contract was down 0.3% and the Nasdaq 100 futures contract was 0.3% lower.

Apple set an all-time high Monday, and the iPhone maker is now a few share points away from registering a two trillion dollar market capitalization. The share price to look out for is $467.77, before the company undergoes a 4-for-1 share split, compared with Monday’s $435.75 closing level.

Helping the tone were reports the White House was considering acting on its own to boost unemployment benefits, with the stalemate in Washington meaning many citizens are currently missing out on $600 a week payments.

This indicates many investors are waiting on news from Washington, and House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin indicated that talks on Monday on a new virus relief package yielded “a little bit” of progress.

4. BP continues Big Oil’s tale of woe

BP cut its dividend for the first time in a decade Tuesday, to 5.25 cents per share, continuing the string of weak results from the oil sector as the coronavirus pandemic weighed heavily.

The British oil giant said it lost $16.8 billion in the second quarter after taking a charge of $10.9 billion, mostly for writing down the value of various projects after the steep fall in oil prices. Its underlying replacement cost loss was $6.7 billion, compared with a profit of $2.8 billion in the year-ago quarter.

The one saving grace for the company was its trading division, which delivered an “exceptionally strong result,” BP said.

European rivals Total, Shell (LON:RDSa) and Equinor have also all reported healthy trading gains, helping their bottom lines in these difficult times, while American counterparts Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), which are not as robust with their trading, posted their worst set of quarterly results of the modern era.

5. Electric vehicle sector also includes Nikola

The U.S. earnings season continues Tuesday, and one company that may be in the spotlight Tuesday is Nikola which releases its second quarter numbers.

While Tesla (NASDAQ:TSLA) has taken most of the limelight in the electric vehicle sector, Deutsche Bank (DE:DBKGn) said in a note on Monday that the electric truck maker could be worth a buy ahead of its latest update. Among the things investors are hoping to learn more about are the customer pipeline for Nikola’s electric semi, its plans to build a hydrogen refueling network, and a manufacturing partner for its Badger pickup truck, according to Deutsche Bank analyst Emmanuel Rosner.

Nikola stock is up 11% this week, but down over 36% this month.