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Futures Pointing To Sharply Lower Open On Yield Inversion

The major U.S. index futures are currently pointing to a sharply lower opening on Wednesday as traders keep a close eye on developments in the bond markets.

Concerns about a potential recession may weigh on Wall Street after the yield on the benchmark ten-year note dropped below the yield on the two-year note earlier this morning.

The inversion is widely seen as an indicator of a recession, although data from Credit Suisse shows the economic downturn typically does not occur until almost two years later.

The yield on the closely watched thirty-year bond has also shown a notable decrease, tumbling to a new record intraday low.

Negative sentiment may also be generated in reaction to a disappointing batch of Chinese economic data, which may add to concerns about the global demand outlook.

Overall trading activity may be somewhat subdued, however, as traders look ahead to an avalanche of U.S. economic data on Thursday.

Traders are likely to keep a close eye on the latest reports on weekly jobless claims, retail sales, and industrial production.

However, traders will also be presented with data on regional manufacturing activity, labor productivity and costs, business inventories, and homebuilder confidence.

Stocks moved sharply higher in morning trading on Tuesday and remained firmly positive for the remainder of the session. With the jump on the day, the major averages offset the steep losses posted on Monday.

The major averages pulled back off their best levels of the day but remained firmly positive. The Dow jumped 372.54 points or 1.4 percent to 26,279.91, the Nasdaq soared 152.95 points or 2 percent to 8,016.36 and the S&P 500 surged up 43.23 points or 1.5 percent to 2,926.32.

The rally on Wall Street came after U.S. Trade Representative Robert Lighthizer offered a temporary reprieve from concerns about the U.S.-China trade war by announcing a delay in imposing new tariffs on certain Chinese products.

Lighthizer said the 10 percent tariff set to take effect on September 1st should be delayed until December 15th for certain products.

The products benefiting from the delay include cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.

Additionally, the USTR announced certain unidentified products will be removed from the tariff list entirely based on health, safety, national security and other factors.

Lighthizer said the delay is part of the USTR's public comment and hearing process and noted it intends to conduct an exclusion process for products subject to the additional tariffs.

The announcement comes less than two weeks after President Donald Trump announced plans to impose a 10 percent tariff on the remaining $300 billion worth of Chinese imports, sparking a sell-off on Wall Street.

Trump told reporters the delay comes amid concerns the tariffs could impact U.S. customers during the holiday shopping season even though he has repeatedly claimed the trade dispute has not hurt Americans.

In U.S. economic news, the Labor Department released a report showing consumer prices rose in line with economist estimates in the month of July, although the report also showed another bigger than expected increase in core consumer prices.

The Labor Department said its consumer price index climbed by 0.3 percent in July after inching up by 0.1 percent in both May and June. Economists had expected prices to rise by 0.3 percent.

Excluding food and energy prices, core consumer prices also rose by 0.3 percent for the second consecutive month, while economists had expected a 0.2 percent uptick.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the bigger than expected increase in core prices "suggests that underlying inflationary pressures may not be as subdued as is widely assumed."

"Provided that the incoming activity data continue to deteriorate, however, the Fed still looks likely to cut interest rates again next month," Hunter said.

The report showed the annual rate growth in both consumer prices and core consumer prices accelerated to 1.8 percent and 2.2 percent, respectively.

Steel stocks showed a substantial rebound after falling sharply over the two previous sessions, with the NYSE Arca Steel Index spiking by 2.9 percent. The index ended Monday's trading at a nearly three-year closing low.

Considerable strength also emerged among semiconductor stocks, as reflected by the 3 percent jump by the Philadelphia Semiconductor Index.

Computer hardware stocks also turned in a particularly strong performance on the news of the delayed tariffs, driving the NYSE Arca Computer Hardware Index up by 2.2 percent.

Software, retail, and networking stocks also moved notably higher, while gold stocks bucked the uptrend amid a decrease by the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are tumbling $1.62 to $55.48 a barrel after soaring $2.17 to $57.10 a barrel on Tuesday. Meanwhile, after falling $3.10 to $1,514.10 an ounce in the previous session, gold futures are climbing $8.50 to $1,522.60 an ounce.

On the currency front, the U.S. dollar is trading at 105.95 yen compared to the 106.74 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1177 compared to yesterday's $1.1171.

Asia

Asian stocks ended mostly higher on Wednesday after the Trump administration delayed imposing tariffs on certain Chinese products and removed some products from the tariff list, citing health, safety, national security and other factors.

The boost from the U.S. announcement overnight offset data pointing to a further loss of economic momentum in China.

Chinese shares ended higher as the tariff reprieve from Washington helped investors shrug off weak data. The benchmark Shanghai Composite Index gave up much of its early gains but still closed up 11.66 points or 0.4 percent at 2,808.91. Hong Kong's Hang Seng Index inched up 20.98 points or 0.1 percent to 25,302.28.

China's industrial production and retail sales grew at weaker pace in July, data from the National Bureau of Statistics showed. Industrial output growth eased to 4.8 percent in July from 6.3 percent in June. Output was forecast to expand 6 percent.

Likewise, growth in retail sales slowed to 7.6 percent from 9.8 percent, while the expected pace of growth was 8.6 percent.

During the January to July period, fixed asset investment logged annual growth of 5.7 percent compared to the 5.8 percent increase in January to June. The rate was forecast to remain unchanged.

Japanese shares rose sharply as concerns over the U.S.-China trade war eased and data showed a surprise rebound in Japan's core machinery orders in June.

The total value of core machine orders in Japan jumped a seasonally adjusted 13.9 percent month-on-month in June, the Cabinet Office said in a report. That blew away forecasts for a decline of 1.0 percent following the 7.8 decline in May.

On a yearly basis, core machine orders spiked 12.5 percent - again crushing expectations for a drop of 1.1 percent following the 3.7 percent decline in the previous month.

The Nikkei 225 Index jumped 199.69 points or 1 percent to 20,655.13, while the broader Topix closed 0.9 percent higher at 1,499.50.

Exporters finished broadly higher as the yen weakened to the 106 against the dollar. Nintendo, which is foraying into the vast Chinese market via a partnership with local gaming champion Tencent, surged up 4.3 percent.

Heavyweights Fast Retailing and SoftBank Group advanced around 1.4 percent, while Fanuc rallied 2 percent. Japan Petroleum soared 8.6 percent and Inpex added 3.5 percent after a surge in crude oil prices overnight.

Australian markets fluctuated before ending modestly higher. The benchmark S&P/ASX 200 Index rose 27.40 points or 0.4 percent to 6,595.90, while the broader All Ordinaries Index ended up 29.40 points or 0.4 percent at 6,677.50.

Miners bounced back as trade war tensions appeared to be easing. BHP rose 1.1 percent and smaller rival Fortescue Metals soared 4.7 percent. Oil stocks Woodside Petroleum, Origin Energy, Oil Search and Santos climbed 1-2 percent after crude oil prices gained 4 percent overnight.

Biotech major CSL spiked 6.6 percent after reporting its best annual profit and predicting another record profit in 2020. Retirement home operator Aveo Group advanced 5.5 percent after it agreed to be acquired by Brookfield Asset Management for A$1.27 billion.

Meanwhile, gold miners succumbed to heavy selling pressure as gold prices dropped from a six-year high on easing U.S.-China trade tensions. Evolution Mining slumped 4.4 percent and Newcrest gave up 2.2 percent.

Lender Commonwealth Bank of Australia lost 3.6 percent on going ex-dividend. National Australia Bank finished marginally lower after posting flat quarterly profit.

Australia's consumer confidence strengthened in August, survey data from Westpac showed today. The Westpac-Melbourne Institute Index of Consumer Sentiment rose to 100 in August from 96.5 in July.

Seoul stocks gave up some early gains as China's key economic indicators for July painted a lackluster picture of the world's second largest economy.

The benchmark Kospi rallied nearly 1.4 percent in early trading before ending the session up 12.54 points or 0.7 percent at 1,938.37.

Europe

European stocks have retreated on Wednesday as weak data from China and Germany overshadow investor optimism over the U.S. temporarily delaying news tariffs on certain Chinese products.

A slew of Chinese economic data surprised to the downside, while German GDP shrank 0.1 percent sequentially in the second quarter, raising concerns about the state of the global economy.

Meanwhile, Eurozone economic growth halved in the second quarter, as initially estimated, the latest data from Eurostat showed.

GDP grew 0.2 percent sequentially, following the first quarter's 0.4 percent expansion. The rate was in line with the estimate released on July 31.

Year-on-year, economic growth eased to 1.1 percent from 1.2 percent, in line with the preliminary flash estimate.

Elsewhere, U.K. consumer prices climbed 2.1 percent year-on-year in July, faster than the 2 percent increase in June, a government report showed.

While the German DAX Index has plunged by 2 percent, the French CAC 40 Index is down by 1.8 percent and the U.K.'s FTSE 100 Index is down by 1.4 percent.

Swiss elevator and escalator manufacturer Schindler has moved sharply lower after its second quarter profit declined 22 percent.

Bilfinger is showing a steep drop after the German engineering and industrial services provider slipped to loss in the second quarter versus a net profit of 11 million euros in the prior year.

On the other hand, German wind turbine maker Nordex Group has jumped after confirming its guidance. After a weaker first half of 2019, the company expects a significant rise in activity levels with considerably higher sales in the second half of the year.

Shares of Admiral Group has also surged higher after the insurer posted "modest" profit growth in the first half, driven by more customers in its U.K. business.

Shares of infrastructure group Balfour Beatty have also soared after reporting higher first-half underlying pretax profit.

U.S. Economic Reports

Import prices in the U.S. unexpectedly showed a modest increase in the month of July, according to a report released by the Labor Department.

The Labor Department said import prices rose by 0.2 percent in July after plunging by a revised 1.1 percent in June.

Economists had expected import prices to come in unchanged compared to the 0.9 percent slump originally reported for the previous month.

The report also showed an unexpected uptick in export prices, which crept up by 0.2 percent in July after falling by a revised 0.6 percent in June.

Export prices had also been expected to come in unchanged compared to the 0.7 percent decrease originally reported for the previous month.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended August 9th.

Crude oil inventories are expected to drop by 2.8 million barrels after rising by 2.4 million barrels in the previous week.

Stocks In Focus

Shares of Macy's (M) are moving sharply lower in pre-market trading after the department store chain reported weaker than expected second quarter earnings and cuts its full-year guidance.

Myriad Genetics (MYGN) is also seeing substantial pre-market weakness after the molecular diagnostic company reported fiscal fourth quarter results that missed analyst estimates on both the top and bottom lines.

Shares of Tilray (TLRY) may also come under pressure after the Canadian cannabis company reported a wider than expected second quarter loss.

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