Opening Bell: Stocks Slip As Bleak Economic Data Eclipses Trade, Rate Cut Hopes
Investing.com | Sep 10, 2019 05:29AM ET
- U.S. futures, European shares drop as dismal economic data re-awakens global recession fears
- Pound drops as U.K. Parliament enters shutdown after rebuffing early election plans
- Gold keeps sliding but macro drivers remain to the upside
- WTI climbs on stronger outlook for further OPEC cuts
European stocks and futures on the S&P 500, Dow and NASDAQ 100 edged lower this morning ahead of key central bank meetings, as some grim economic data from China re-ignited the specter of a global recession.
Producers prices in the Asian country dropped at the fastest rate in three years in August, while dismal figures from Japan's machine tool orders—which plunged 37% year-on-year—and Italy's industrial production—which slipped 0.7% in July—added to fears that national economies are taking a beating from global trade uncertainty.
Healthcare and utilities dragged the STOXX 600 to a second-day selloff. Technically, the gauge might be topping out after nearing the April to July highs.
In the U.K., the pound partly gave up its gains after Prime Minister Boris Johnson's calls for an early election were once again rejected by parliament, just as its five-week suspension kicks in. Overall, the sterling’s selloff may seem somewhat incongruous, as lawmakers rebuffed a no-deal Brexit after harshly opposing former leader Theresa May's efforts to strike a compromise agreement with EU counterparts.
In the earlier Asian session, regional stocks were mixed. South Korea’s KOSPI (+0.62%) outperformed while Japan’s Nikkei 225 (+0.35%) came in second— investors may have bought the dip on the former: South Korean assets have been hit by a trade dispute with Japan that peaked over the summer; while Japanese shares reached a six-week high today, also thanks to the yen’s weakness, which boosts exports.
And the currency may get weaker yet, if the downtrend continues.
h2 Global Financial Affairs/h2Yesterday, U.S. equities managed to stay afloat at neutral levels thanks to the Energy sector’s 2% surge—on a higher outlook for further supply cuts by OPEC oil producers.
At the opposite side of the spectrum, Healthcare (-0.91%) stocks led the losses as some Wall Street analysts, including Goldman Sachs's Asad Haider, sounded alarm bells on a “potential onslaught of drug pricing headlines in the coming weeks following Congress’s August recess.” Mega-cap tech names also retreated. Overall, stocks coveted for their high dividend yields, including real estate and utility names, retreated as the government bonds' 10-year rate topped 1.6%.
Get The News You Want
Gold headed for its fourth day of declines, trading at around $1,490 an ounce. In the background, though, both China and Russia were reported to be ramping up their gold reserves . Are the two economic powers seeking to dump U.S. Treasurys?
WTI held gains—above the 100 DMA and the downtrend line since April 23—from the highest level in almost six weeks as Saudi Arabia’s new energy minister signaled his commitment to production cuts ahead of an OPEC+ meeting later this week.
All eyes are now on Thursday’s ECB decision, as well as meetings by the Fed and the BoE next week, with investors pinning their hopes on central banks extending the golden age of monetary policy easing and thereby stretching out the longest economic expansion on record.
However, the fact U.S. futures and global markets are not exuberant, even amid positive comments by U.S. Treasury Secretary Steven Mnuchin on upcoming trade talks, raises a red flag about investors' overall confidence.
h2 Up Ahead/h2- OPEC’s monthly oil market report, which includes demand forecasts and production estimates, is due on Wednesday.
- ECB policymakers are widely expected to back an interest rates cut on Thursday and discuss all stimulus options, including QE. They will also publish forecasts for growth and inflation and President Mario Draghi will hold a press conference.
Stocks
- The U.K.’s FTSE 100 dropped 0.4%.
- The MSCI Emerging Market Index fell 0.1%.
- The MSCI Asia Pacific Index was unchanged.
Currencies
- The Dollar Index opened 0.6% higher and extended the advance to 0.13%.
- The euro climbed 0.1% to $1.1054.
- The British pound increased 0.1%.
- The Japanese yen declined 0.1%.
- The MSCI Emerging Markets Currency Index ticked 0.1% higher.
Bonds
- The yield on 10-year Treasurys fell one basis point to 1.64%.
- Britain’s 10-year yield climbed one basis point to 0.6%.
- Germany’s 10-year yield increased two basis points to -0.57%.
Commodities
- West Texas Intermediate crude climbed 0.4% to $58.08 a barrel.
- The Bloomberg Commodity Index advanced 0.2%.
- Gold slid 0.5% to $1,491.73 an ounce.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.