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Beyond the Numbers

Futures Pointing To Modestly Higher Open On Wall Street
9/30/2019 8:59 AM

The major U.S. index futures are currently pointing to a modestly higher opening on Monday, with stocks likely to move back to the upside following the weakness seen last Friday.

Early buying interest may be generated in reaction to news that a Treasury Department spokeswoman denied reports the Trump administration is considering delisting Chinese companies from U.S. stock exchanges

“The administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time. We welcome investment in the United States,” Treasury spokeswoman Monica Crowley said in a statement.

Crowley’s statement comes on the heels of reports suggesting the administration is contemplating ways to curb U.S. investments in China.

White House trade advisor Peter Navarro attacked the media reports in an interview with CNBC on Monday, claiming “over half” of a Bloomberg report about potential restrictions was “highly inaccurate or simply flat-out false.”

“This story was just so full of inaccuracies and in terms of the truth of the matter, what the Treasury said I think was accurate,” Navarro said.

Better than expected manufacturing data out of China may also temper some of the recent concerns about the impact of the U.S.-China trade war.

After seeing considerable volatility in the morning, stocks moved mostly lower over the course of the trading session on Friday. The major averages all slid firmly into negative territory, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages climbed off their worst levels going into the close but remained in the red. The Dow dipped 70.87 points or 0.3 percent to 26,820.25, the Nasdaq tumbled 91.03 points or 1.1 percent to 7,939.63 and the S&P 500 fell 15.83 points or 0.5 percent to 2,961.79.

For the week, the Nasdaq plunged by 2.2 percent, the S&P 500 slumped by 1 percent and the Dow dropped by 0.4 percent.

Stocks moved to the downside after a report from Bloomberg News said Trump administration officials are discussing ways to limit U.S. investors' portfolio flows into China.

Citing people familiar with the internal deliberations, Bloomberg noted the move would have repercussions for billions of dollars in investment pegged to major indexes.

A source family with the matter confirmed to CNBC that the White House is weighing some curbs on U.S. investments in China but noted the discussions are in the preliminary stages and nothing has been decided.

The reports reflect the ever-changing landscape of U.S.-China relations that has kept traders reluctant to make significant bets.

Earlier in the day, traders expressed some optimism about U.S.-China trade talks after a report from CNBC said negotiations are set to resume October 10th in Washington.

A person close to the talks said Chinese Vice Premier Liu He would be representing the delegation from Beijing at the meetings.

The U.S. and China held deputy-level trade talks last week, although Treasury Secretary Steven Mnuchin called off a trip by Chinese officials to U.S. farms.

On the U.S. economic front, the Commerce Department released a report unexpectedly showing a modest increase in U.S. durable goods orders in the month of August.

The Commerce Department said durable goods orders rose by 0.2 percent in August after jumping by 2.0 percent in July. The continued increase surprised economists, who had expected orders to pull back by 1.0 percent.

Excluding a drop in orders for transportation equipment, durable goods orders increased by 0.5 percent in August after falling by 0.5 percent in July. Economists had expected ex-transportation orders to rise by 0.2 percent.

However, the report also said orders for non-defense capital goods excluding aircraft, a key indicator of business spending, edged down by 0.2 percent in August after coming in unchanged in July.

A separate Commerce Department report showed U.S. personal income rose in line with economist estimates in the month of August, although personal spending inched up by less than expected.

The Commerce Department said personal income climbed by 0.4 percent in August after ticking up by 0.1 percent in July. The increase in income matched economist estimates.

Meanwhile, the report said personal spending crept up by 0.1 percent in August after climbing by 0.5 percent in July. Spending had been expected to rise by 0.3 percent.

Semiconductor stocks showed a significant move to the downside over the course of the trading session, dragging the Philadelphia Semiconductor Index down by 2.4 percent.

Chipmaker Micron Technology (MU) led the sector lower after reporting better than expected fiscal fourth quarter results but providing disappointing guidance.

Considerable weakness was also visible among gold stocks, as reflected by the 2.1 percent slump by the NYSE Arca Gold Bugs Index.

The weakness in the gold sector came as the price of the precious metal climbed off its worst levels but still showed a notable decrease.

Software, telecom, and oil service stocks also came under pressure as the day progressed, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.87 to $55.04 a barrel after falling $0.50 to $55.91 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,491.60, down $14.80 from the previous session’s close of $1,506.40. On Friday, gold slid $8.80.

On the currency front, the U.S. dollar is trading at 108.00 yen compared to the 107.92 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.0897 compared to last Friday’s $1.0940.

Asia

Asian stocks turned in a mixed performance on Monday even as Chinese factory activity data beat forecasts and the White House said nothing has been decided on curbing some U.S. investments in China.

China's manufacturing sector expanded at the fastest pace since early 2018 in September despite the ongoing trade dispute with the United States, survey data from IHS Markit showed. The Caixin factory Purchasing Managers' Index rose to 51.4 in September from 50.4 in August.

However, official data from the National Bureau of Statistics revealed that the factory sector continued to contract in September, although the manufacturing PMI climbed to 49.8 from 49.5 a month ago.

Chinese shares fell sharply as uncertainty over the long-running trade war fueled volatility before an important week-long holiday.

As the Communist Party of China prepares to celebrate the 70th anniversary of its rule, pro-democracy protesters and police engaged in running street battles in a march billed as a rally against global totalitarianism in Hong Kong on Sunday. Protestors are hoping to disrupt Beijing's celebrations on Tuesday with further mass rallies.

The benchmark Shanghai Composite Index tumbled 26.98 points, or 0.9 percent, to 2,905.19, while Hong Kong's Hang Seng Index rose 137.46 points, or 0.5 percent, to 26,092.27.

Japanese stocks closed lower as the yen rose slightly following reports that the Trump administration is mulling severe new restrictions on investment in China.

The Nikkei 225 Index slid 123.06 points, or 0.6 percent, to finish at 21,755.84 ahead of the Bank of Japan´s Tankan quarterly business confidence survey due on Tuesday, which will offer a read on the health of the industrial sector. The broader Topix closed 1 percent lower at 1,587.80.

Heavyweight SoftBank Group fell 2.6 percent. Automakers Honda Motor, Nissan and Toyota ended down between 1.5 percent and 2.1 percent.

Sumitomo Chemical Co. dropped 1.6 percent as it agreed to buy the South American operations of Australian agrichemical maker Nufarm.

Australian markets fluctuated before finishing lower amid uncertainty surrounding the U.S.-China trade war. The benchmark S&P/ASX 200 Index dropped 27.80 points, or 0.4 percent, to 6,688.30, while the broader All Ordinaries Index ended the session down 23.50 points, or 0.3 percent, at 6,800.60.

Energy stocks ended mostly lower despite oil prices recovering from a two-week low touched in the previous session. The big four banks fell between 0.4 percent and 0.9 percent ahead of Tuesday's Reserve Bank of Australia meeting, with markets speculating on the odds of a rate cut.

Meanwhile, agricultural chemicals group Nufarm jumped over 26 percent as it agreed to sell its South American business to Japanese conglomerate Sumitomo Chemical Co. for A$1.18 billion.

Miners ended mixed, with BHP and Fortescue Metals Group finishing modestly lower while Rio Tinto gained 1.2 percent.

Seoul stocks rose notably, with auto and tech stocks rebounding amid institutional buying. The Kospi climbed 13.12 points, or 0.6 percent, to 2,063.05.

Market heavyweight Samsung Electronics rallied 1.3 percent, chipmaker SK Hynix advanced 1 percent and auto parts maker Hyundai Mobis added 1.2 percent.

Europe

European stocks are turning in a lackluster performance on Monday as the United States ramps up pressure on China before high-level trade talks next week.

Media reports suggested that the Trump administration was considering ways to delist Chinese companies from U.S. stock exchanges and limit U.S. investors' portfolio flows into China. However, the White House said nothing has been decided on curbing U.S. investments in China.

Chinese manufacturing data topped forecasts and a measure of the unemployment rate in the euro zone dropped in August to its lowest level in more than a decade, helping support underlying sentiment.

While the German DAX Index is up by 0.1 percent and the French CAC 40 Index is up by 0.2 percent, the U.K.’s FTSE 100 Index has edged down by 0.1 percent as the pound rose slightly after the release of GDP data showing that Britain's economy has grown a little faster than previously thought over the last year.

On an annualized basis, U.K. GDP grew 1.3 percent in the second quarter of 2019, beating expectations for 1.2 percent growth and up from the previous reading of 1.2 percent.

Separately, the Eurozone unemployment rate unexpectedly dropped in August to its lowest level in more than a decade, preliminary data from Eurostat showed.

The seasonally adjusted unemployment rate fell to 7.4 percent from 7.5 percent in July. Economists had expected the rate to remain unchanged.

French building materials company Saint-Gobain has jumped after the company reached an agreement to sell its construction glass activity in South Korea, Hankuk Glass Industries, to Korea-based Glenwood Private Equity.

Swedish Orphan Biovitrum has also moved sharply higher after entering into an agreement to buy U.S. rare diseases specialist Dova Pharmaceuticals.

British home emergency repairs firm HomeServe has also shown a strong move to the upside after RBC raised its rating on the stock.

On the other hand, Dutch telecoms firm Royal KPN has fallen after saying it won't hire Dominique Leroy as its new chief executive amid an investigation by Belgian authorities into the sale of her shares in former company Proximus.

U.S. Economic Reports

MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of September at 9:45 am ET. The Chicago business barometer is expected to edge down to 50.2 in September from 50.4 in August, with a reading above 50 indicating growth.

Stocks In Focus

Shares of Bed Bath & Beyond (BBBY) are moving significantly higher in pre-market trading after Wedbush upgraded its rating on the retailer to Outperform from Neutral.
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