The Thursday Market Minute
- Global stocks retreat following the Fed’s dovish take on rates and the recovery, as worldwide coronavirus cases look set to pass the 30 million mark.
- President Donald Trump says he’s not thrilled by a plan to partner TikTok with Oracle, suggesting that ByteDance’s ongoing control would not satisfy national security concerns.
- Trump also pushes GOP lawmakers to work with Democrats to reach a deal on stimulus as more signs of consumer weakness emerge in the broader economy.
- European car sales plummet in August, underscoring more weakness linked to the coronavirus pandemic, as shares resume their recent slide.
- U.S. equity futures suggest a weaker open on Wall Street ahead of housing starts data and weekly jobless claims at 8:30 am Eastern time.
U.S. equity futures slumped lower Thursday, while the dollar rallied and oil retreated, as investors parsed statements on the economy from Federal Reserve Chairman Jerome Powell and looked to weekly jobless claims data before the start of trading.
Stocks reversed course sharply last night following Powell’s virtual question-and-answer session with the media Wednesday in Washington, during which he expressed concern for the longer-term fate of the domestic recovery while underscoring the Fed’s commitment to keeping interest rates are near zero percent until at least the end of 2023.
There was no single catalyst from Powell’s statement, nor his media session, that triggered the pullback, which followed a solid four-day rally on Wall Street that had lifted the Nasdaq well past the 11,000 point mark, but a notable lack of detail regarding new QE purchases was enough to push benchmark 10-year government bond yields modestly higher and add modest overnight strength to the dollar.
Equity futures weakened further on comments from President Donald Trump, who said he was underwhelmed by a proposal that would see ByteDance, the China-based owner of TikTok, remain in control of the video sharing app if and when its partnered with software group Oracle Corp. ORCL.
Trump also pressed Republican lawmakers to work with House and Senate Democrats and reach a deal on fresh stimulus for the now stalling economy, urging them to ‘go for the big numbers’ in a Wednesday Tweet.
Wall Street looks set to follow last night’s selling with more downward moves this morning, however, as futures contracts tied to the Dow Jones Industrial Average suggest a 250 point pullback and those linked to the S&P 500, which is down 3.3% for the month, indicate a 33 point pullback.
A staggering fall of 17.6% in European car sales last month rattled European stocks, which fell across the board even as the pound and the euro eased against a rising U.S. dollar.
The Stoxx 600 benchmark fell 0.67% in the opening hours of trading in Frankfurt, while Britain’s FTSE 100 was last seen 1% lower at 6,201.41 points.
The U.S. dollar index edged 0.05% higher on the session against a basket of its global peers to trade at 93.215, while benchmark 10-year Treasury bond yields were marked 3 basis points higher from yesterday’s lows to trade at 0.684% in early European dealing.
Oil prices turned lower after a three-day rally had lifted U.S. crude past $40 a barrel as Hurricane Sally shuttered Gulf oil facilities as it slammed into the Alabama and Mississippi coastlines, as the firmer dollar and questions over the pace of global demand blunted the market’s bullish sentiment.
WTI contracts for October delivery, the U.S. benchmark, traded 15 cents lower from their Wednesday close in New York at $40.01 per barrel in early European dealing while Brent contracts for November, the new global benchmark, were seen 18 cents lower at $42.04 per barrel.
Overnight in Asia, Wall Street’s late-session sell off, as well as a multi-month high of 104.74 for the yen, clipped gains for the Nikkei 225 in Tokyo, which fell 0.67% on the session to 23,319.37 points.
The region-wide MSCI ex-Japan benchmark, meanwhile, slumped 1% heading into the final hours of trading on the back of bigger pullbacks in Hong Kong, Taiwan and Sydney.