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Futures Pointing To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower opening on Monday, with stocks likely to move back to the downside after recovering from an early sell-off in the previous session.

Selling pressure may resurface amid waning optimism about a near-term interest rate cut following last Friday's release of better than expected jobs data.

CME Group's FedWatch Tool still points to a rate cut at the next Federal Reserve meeting later this month, although expectations have dramatically shifted toward a 25 basis point cut rather than a 50 basis point cut.

The shift came after the Labor Department's closely watched report showed employment jumped by 224,000 jobs in June compared to expectations for an increase of 160,000 jobs.

In light of the focus on the outlook for rates, trading may be somewhat subdued ahead of Federal Reserve Chairman Jerome Powell's congressional testimony later this week.

Powell is due to testify before the House Financial Services Committee on Wednesday and before the Senate Banking Committee on Thursday.

Wednesday will also see the release of the minutes of the Fed's last monetary policy meeting, which may shed additional light on the central bank's decision to make notable changes to its accompanying statement.

After falling sharply early in the session, stocks showed a substantial recovery attempt over the course of the trading day on Friday. The major averages climbed well off their worst levels of the day but still ended the session in negative territory.

The Dow fell by more than 230 points at its lows of the session but ended the day down just 43.88 points or 0.2 percent at 26,922.12. The Nasdaq edged down 8.44 points or 0.1 percent to 8,161.79 and the S&P 500 dipped 5.41 points or 0.2 percent to 2,990.41.

Despite pulling back off Wednesday's record closing highs, the major averages still moved to the upside for the week. The Dow jumped by 1.2 percent, while the Nasdaq and the S&P 500 surged up by 1.9 percent and 1.7 percent, respectively.

The early pullback by stocks came following the release of the Labor Department report showing a substantial reacceleration in the pace of U.S. job growth in the month of June.

While the data points to a rebound in the labor market following the weakness seen in May, the report dampened investor hopes for a near-term interest rate cut by the Fed.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the strong jobs data would seem to "make a mockery" of market expectations the Fed will cut interest rates by up to 50 basis points later this month.

"Employment growth is still trending gradually lower but, with the stock market setting new records and trade talks back on (for now at least), the data support our view that Fed officials are more likely to wait until September before loosening policy," Hunter said.

Despite the stronger than expected job growth, the report said the unemployment rate inched up to 3.7 percent in June from 3.6 percent in May. The unemployment rate had been expected to hold steady.

The uptick in the unemployment rate reflected an increase in the size of the labor force, which expanded by 335,000 people compared to the 247,000-person jump in the household survey measure of employment.

Selling pressure waned over the course of the session, however, as traders seemed to realize a strong economy could continue to push stocks higher even without a rate cut by the Fed.

Most of the major sectors ended the day showing only modest moves, although significant weakness remained visible among pharmaceutical stocks.

Reflecting the weakness in the pharmaceutical sector, the NYSE Arca Pharmaceutical Index slumped by 1.5 percent after ending the previous session at a record closing high.

Biotechnology stocks also showed a notable move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 1.3 percent.

On the other hand, considerable strength emerged among brokerage stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Broker/Dealer Index.

Commodity, Currency Markets

Crude oil futures are edging down $0.17 to $57.34 a barrel after rising $0.17 to $57.51 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,407.50, up $7.40 from the previous session's close of $1,400.10. On Friday, gold plunged $20.80.

On the currency front, the U.S. dollar is trading at 108.55 yen compared to the 108.47 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1223 compared to last Friday's $1.12225.

Asia

Asian stocks retreated on Monday as strong U.S. jobs data tempered expectations for a near-term interest rate cut by the Federal Reserve.

Geopolitical tensions also dented sentiment after Iran said it would break a limit set on uranium enrichment under its 2015 nuclear accord with major world powers.

China's Shanghai Composite Index plummeted 77.70 points or 2.6 percent to 2,933.36 as U.S.-China trade talks resume with phone calls. Hong Kong's Hang Seng Index tumbled 443.14 points or 1.5 percent to 28,331.69.

As officials try to resolve a yearlong trade war, Chinese Vice President Wang Qishan warned against "protectionism in the name of national security, and called on major powers to make more contributions to global peace and stability.

Meanwhile, China's foreign exchange reserves increased marginally in June, data from the People's Bank of China showed. Foreign exchange reserves rose by $18.2 billion to $3.119 trillion at the end of June from $3.101 trillion at the end of May.

Japanese shares fell as Fed rate cuts hopes faded and weak machinery orders data fanned concerns about domestic demand. The Nikkei 225 Index ended down 212.03 points or 1 percent at 21,534.35, while the broader Topix closed 0.9 percent lower at 1,578.40.

Core machine orders in Japan were down 7.8 percent sequentially in May, the Cabinet Office said in a report. That missed expectations for a decline of 3.7 percent following a 5.2 percent increase in April. On a yearly basis, core machine orders fell 3.7 percent versus expectations for a drop of 3.6 percent.

Japan's trade surplus for May beat expectations, while overall bank lending figures for the month came in line with estimates.

Market heavyweight SoftBank declined 1.7 percent and Fanuc shed 0.9 percent. Banks bucked the weak trend to end on a flat note after U.S. Treasury yields rose.

Australian markets pulled back sharply to suffer their biggest intraday fall in five weeks, with banks and miners pacing the declines. The benchmark S&P/ASX 200 Index dropped 79.10 points or 1.2 percent to 6.672.20, while the broader All Ordinaries Index ended down 74.40 points or 1.1 percent at 6,757.40.

Lower iron ore prices weighed on the mining sector, with BHP declining 1.8 percent and Rio Tinto losing 1 percent.

Gold miners also came under selling pressure as bullion fell in the face of a stronger dollar. Newcrest Mining shed 0.8 percent and Northern Star gave up 1.9 percent.

The big four banks fell between 0.9 percent and 1.2 percent on concerns that lower interest rates will crunch their profit margins. In the healthcare sector, CSL declined 1.5 percent and Cochlear lost 2.2 percent.

On the data front, Australian job ads grew by a seasonally adjusted 4.6 percent in June, reversing an 8.2 percent nosedive in May, data from ANZ showed. The increase was the biggest since January 2018.

Seoul stocks tumbled as a row over forced wartime labor threatened to disrupt global supplies of South Korean memory chips and smartphones.

The Kospi ended down 46.42 points or 2.2 percent to 2,064.17. Tech giant Samsung Electronics plunged 2.7 percent and SK Hynix dropped 1.5 percent.

Europe

European stocks have moved modestly lower on Monday as investors scale back expectations for a near-term U.S. rate cut and look for progress in the long-running U.S.-China trade dispute.

While the U.K.'s FTSE 100 Index is just below the unchanged line, the French CAC 40 Index is down by 0.2 percent and the German DAX Index is down by 0.3 percent.

Deutsche Bank shares have fallen in choppy trading as the German lender launched a major overhaul with plans to slash 18,000 jobs globally.

French food services and facilities management company Sodexo S.A. has also tumbled after it warned of slower growth in the fourth quarter. Asset manager Schroders has fallen in London on a brokerage downgrade.

British Airways parent International Consolidated Airlines Group has also slid on news it will be fined 183.4 million pounds by the U.K. Information Commissioner's Office for the theft of customer data from British Airways website last year.

On the other hand, Imperial Brands has rallied after the tobacco company unveiled plans to return surplus cash flows to shareholders via share buybacks, enhanced dividends or special dividends.

Steinhoff International Holdings N.V. has also jumped on news Philip Dieperink will resign as CFO and from the Management Board, effective 31 August 2019.

Acacia Mining has also moved to the upside on the day after its second quarter gold production climbed 19 percent from last year.

In economic news, German industrial output grew 0.3 percent month-on-month in May, reversing a revised 2 percent slump in April, official data showed. The rate of growth came in line with expectations.

Another report showed that German exports advanced 1.1 percent month-on-month in May, in contrast to a 3.4 percent decrease in April. Shipments were forecast to advance 0.8 percent.

Separately, the Sentix economic index for the Eurozone fell to -5.8 in July from -3.3 in June, hitting its lowest level since November 2014. Economists had forecast an improvement to 0.2.

A monthly survey from Bank of France showed that France's economy is forecast to grow at a slightly slower pace in the second quarter.

U.S. Economic Reports

At 3 pm ET, the Federal Reserve is scheduled to release its report on consumer credit in the month of May. Consumer credit is expected to rise by $16.0 billion in May after climbing by $17.5 billion in April.

Stocks In Focus

Shares of Boeing (BA) may move to the downside in early trading after a Saudi Arabia's flyadeal became the first airline to officially cancel an order for the beleaguered aerospace giant's 737 MAX aircraft.

Tech giant Apple (AAPL) could also see initial weakness after Rosenblatt Securities downgraded its rating on the company's stock to Sell from Neutral.

On the other hand, shares of Symantec (SYMC) are seeing notable pre-market strength after a report from Bloomberg said Broadcom (AVGO) has secured financing for an acquisition of the cybersecurity firm.

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