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Beyond the Numbers

Futures Pointing To Another Lackluster Session On Wall Street
9/10/2019 8:57 AM

The major U.S. index futures are pointing to a roughly flat opening on Tuesday, with stocks likely to extend the lackluster performance seen over the two previous sessions.

Another quiet day on the U.S. economic front may keep some traders on the sidelines as they continue to digest last Friday’s weaker than expected jobs data.

The disappointing job growth raised concerns about the economic outlook but also reinforced expectations of another interest rate cut by the Federal Reserve next week.

Traders may also be reluctant to make significant moves ahead of the European Central Bank meeting on Thursday as well as next week’s Fed meeting.

Both central banks are expected to provide additional stimulus in reaction to recent indications of a slowdown by the global economy.

With the major averages back within striking distance of record highs, traders may be questioning whether stocks will see further upside in an economy that requires support from global central banks to avoid recession.

Stocks showed a lack of direction over the course of the trading day on Monday, extending the lackluster performance seen last Friday. The major averages once again spent the day bouncing back and forth across the unchanged line before closing mixed.

While the Dow inched up 38.05 points or 0.1 percent to 26,835.51, its best closing level in over a month, the tech-heavy Nasdaq dipped 15.64 points or 0.2 percent to 8,087.44 and the S&P 500 edged down 0.28 points or less than a tenth of a percent to 2,978.43.

The choppy trading on Wall Street came amid a light day on the U.S. economic front, with a lack of major data keeping some traders on the sidelines.

Reports on producer and consumer price inflation, retail sales and consumer sentiment are likely to attract attention in the coming days.

Meanwhile, traders expressed some optimism about further stimulus from global central banks, with the European Central Bank expected to cut interest rates at a meeting on Thursday.

Expectations for another interest rate cut by the U.S. Federal Reserve next week were also bolstered by last Friday's weaker than expected jobs data.

Data from China showing an unexpected drop in exports in August has also added to the hopes of more stimulus to stave off a global recession.

Official data showed Chinese exports in August unexpectedly fell by 1 percent compared to year ago, reflecting the ongoing trade dispute with the U.S.

Subsequently, the trade war also remained on investors' minds, although traders seem optimistic about high-level trade talks scheduled for next month.

Some political observers have suggested President Donald Trump may soften his stance on China in order to reach an agreement and prevent a U.S. recession just before Election Day.

Despite the lackluster performance by the broader markets, energy stocks moved sharply higher amid a notable increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index soared by 6.5 percent and 5.8 percent, respectively.

Substantial strength was also visible among banking stocks, as reflected by the 3.6 percent spike by the KBW Bank Index. The strength in the sector reflected the optimism about more global stimulus.

Steel, transportation and computer hardware stocks also saw considerable strength on the day, while gold stocks moved sharply lower amid a drop by the price of the precious metal.

Pharmaceutical and software stocks also showed notable moves to the downside, offsetting the strength seen in the aforementioned sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.61 to $58.46 barrel after jumping $1.33 to $57.85 a barrel on Monday. Meanwhile, after sliding $4.40 to $1,511.10 ounce in the previous session, gold futures are falling $9.40 to $1,501.70 an ounce.

On the currency front, the U.S. dollar is trading at 107.30 yen compared to the 107.24 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1038 compared to yesterday’s $1.1048.

Asia

Asian stocks ended Tuesday's session on a mixed note as Chinese inflation data signaled weakness in domestic and overseas demand. Investors also awaited the ECB, Fed and BoJ meetings for fresh clues on the monetary policy outlook.

Chinese shares ended slightly lower after the release of the inflation data. The benchmark Shanghai Composite Index slipped 0.1 percent to 3,021.20, while Hong Kong's Hang Seng Index ended marginally higher at 26,683.68.

Data showed Chinese consumer prices climbed at a steady pace in August, while producer prices declined further on weak demand, signaling deflationary pressures.

Consumer prices rose 2.8 percent year-on-year in August, the same pace of growth as seen in July. Economists had forecast the rate of inflation to slow to 2.7 percent.

Producer prices fell 0.8 percent annually after easing 0.3 percent in the previous month. Prices were expected to drop 0.9 percent.

Japanese shares hit a six-week high as a weak yen and higher bond yields helped lift exporters and financials. The Nikkei 225 Index ended the session up 73.68, points, or 0.4 percent, at 21,392, while the broader Topix closed 0.4 percent higher at 1,557.99.

Automakers Honda Motor, Toyota Motor and Subaru rose 1-2 percent as the safe-haven yen touched a five-week low of 107.46 per dollar. Mazda Motor shares soared 5 percent.

Nissan Motor jumped 3.7 percent on news that CEO Hiroto Saikawa will resign. Banks Mizuho Financial, Sumitomo Mitsui Financial and Mitsubishi UFJ Financial Group rallied 3-4 percent after U.S. government debt yields rose.

Construction machinery makers Komatsu and Hitachi Construction Machinery climbed 3-4 percent.

Meanwhile, Australian markets fell notably, dragged down by technology and healthcare stocks. The benchmark S&P/ASX 200 Index dropped 33.90 points, or 0.5 percent, to 6,614.10, while the broader All Ordinaries Index ended down 32.10 points, or 0.5 percent, at 6,728.

Tech stocks fell on valuation concerns, with Afterpay Touch Group slumping 4.1 percent and WiseTech Global tumbling 7 percent. In the healthcare sector, Heavyweight drugmaker CSL lost 2.7 percent.

Diversified miner South32 gave up 1.8 percent as copper prices slipped on concerns that China's factory deflation could hit the global economy via exports.

Graphite miner Syrah Resources plummeted 33.3 percent after the company said it would reduce production in October-December to about 5,000 tons per month. Gold miners Evolution and Newcrest gave up around 4 percent as gold prices hit four-week lows.

On the other hand, Origin Energy, Oil Search, Woodside Petroleum and Santos climbed 2-4 percent, buoyed by a rise in oil prices on optimism that OPEC and other countries may agree to extend production cuts.

Australian business confidence and conditions deteriorated in August, survey results from the National Australia Bank showed today. The business confidence index fell to +1 from +4 in July.

Seoul stocks extended gains for the fifth day running on hopes that new talks between the U.S. and China can lead to progress. Markets were also supported by expectations of a new wave of stimulus by the European Central Bank.

The benchmark Kospi climbed 12.53 points, or 0.6 percent, to close at 2,032.08 ahead of the upcoming Chuseok holidays, the Korean equivalent of Thanksgiving.

Europe

European stocks are turning in a lackluster performance on Tuesday after producer price inflation data from China signaled weakness in domestic and overseas demand. Investors are also waiting cues from the ECB, Fed and BoJ meetings.

ECB President Mario Draghi is expected to unleash a barrage of stimulus on Thursday to shore up economic growth amid the U.S.-China trade war.

While the German DAX Index has crept up by 0.2 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both down by 0.2 percent.

Spanish telecom major Telefonica has slumped on reports that it is considering a new employment adjustment to offer voluntary leave for people over 53.

Netherlands-based Qiagen NV has also fallen after it decided to integrate its global sales resources into its Business Areas, comprising Life Sciences, Molecular Diagnostics and Bioinformatics.

Bovis Homes has also shown a notable move to the downside as it revived talks to buy Galliford Try's housing businesses.

On the other hand, Volkswagen shares have risen after German automaker rolled out its first electric car, the ID.3, after unveiling a new brand identity and logo.

JD Sports Fashion has also moved sharply higher after logging higher profits and revenues in the 26 weeks ended August 3rd.

In economic news, French industrial production recovered in July, but the pace of growth was weaker than expected, figures from the statistical office Insee showed.

The U.K. unemployment rate remained at the lowest since late 1974, the Office for National Statistics reported.

In three months to July, the ILO jobless rate remained unchanged sequentially, at 3.8 percent, but slightly below the expected 3.9 percent.

U.S. Economic Reports

The Labor Department is due to release the results of its Job Openings and Labor Turnover Survey for the month of July at 10 am ET. Job openings are expected to drop to 7.30 million in July after dipping to 7.35 million in June

At 1 pm ET, Treasury Department is scheduled to announce the results of its auction of $38 billion worth of three-year notes.

Stocks In Focus

Shares of Ford (F) are moving notably lower in pre-market trading after Moody’s cut the auto giant’s debt rating to junk status to reflect the considerable operating, competitive, and market challenges facing the company.

Industrial distributor HD Supply (HDS) may also come under pressure after reporting weaker than expected fiscal second quarter revenues and providing disappointing guidance.

On the other hand, shares of Mallinckrodt (MNK) are likely to see initial strength after the drugmaker agreed to sell its contract development and manufacturing subsidiary BioVectra to an affiliate of H.I.G. Capital for approximately $250 million.
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