Dow Futures Slide as Trade Concerns, Hong Kong Protests, Blunt Global Sentiment

The Monday Market Minute

  • Global stocks slide as trade concerns, Hong Kong protests sap sentiment and Goldman cautions that no U.S.-China deal is likely before the 2020 elections.
  • Hong Kong protests enter their 10th week, with the city's International airport, one of the world's busiest, closed by officials after violent clashes between police and demonstrators. 
  • Global oil prices slide as markets turn red; IEA sees weakest world demand growth in more than a decade.
  • Wall Street futures suggests deepening opening bell declines Monday ahead of a quiet session for earnings and economic data, with the Dow called 117 points lower at the start of trading.

Market Snapshot

U.S. equity futures drifted lower Monday, while global stocks sputtered and oil prices extended declines, as investors continue to worry that a prolonged U.S.-China trade dispute will damage sentiment and hinder growth in the world's largest economies.

Goldman Sachs said in a client note Sunday that it does not expect a resolution on trade between Washington and Beijing until after next year's Presidential elections, noting that tariffs on the final basket of $300 billion worth of China-made goods - which are set to rise to 10% by September 1 -- will likely hit 25% before a deal is ultimately struck.

Germany's Ifo Institute, meanwhile, said Monday that it's quarterly survey of business and economic experts suggests "significantly weaker growth in world trade" owing to the U.S.-China dispute, as well as "weaker private consumption, lower investment activity, and declining short- and long-term interest rates."

President Donald Trump told reporters Friday that while talks with China remain ongoing "we're not ready to make a deal." 

"China wants to do something, but I'm not ready to do anything yet," he told reporters on the lawn of the White House. Twenty-five years of abuse - I'm not ready so fast, so we'll see how that works out."

Stocks in Asia drifted lower overnight, with the MSCI ex-Japan index sliding 0.33%, with declines extending after reports indicated Hong Kong's airport has been closed due to the ongoing protests in the region, with the benchmark Hang Seng index sliding into negative territory for the year. Liquidity was thinned, however, owing to markets in Japan being closed for the country's 'Mountain Day' holiday. 

This Hong Kong protest movement will no doubt draw the CEO, Lam, to ask the Chinese PLA to restore order. It's textbook at this point. Could be a flash point

— Jim Cramer (@jimcramer) August 12, 2019

U.S. equity futures suggest a similarly-uninspired start to the trading week, with contracts tied to the Dow Jones Industrial Average indicating a 155 point opening bell decline for the 30-stock average while those linked to the S&P 500 indicating a 20 point slide for the broader benchmark. Nasdaq Composite futures indicate a 48 point opening bell decline.

European stocks, however, managed to edge higher by mid-morning in Frankfurt as the euro drifted to 1.11172 against the U.S. dollar and some medium-sized merger activity boosted regional benchmarks, but gave back those gains as U.S. futures began to slide.

Europe's Stoxx 600 was marked 0.3% lower in Frankfurt while Britain's FTSE 100 slumped 0.4%, getting no support for a weaker pound, which fell to a January 2017 low of 1.2059 against the greenback.

Global oil prices were also sliding into the red in early European trading, with declines pegged to both a modestly stronger U.S. dollar and Friday's report from the International Energy Agency in Paris which trimmed its demand forecasts for this year and next, predicting the slowest rate of growth in more than a decade.

Brent crude contracts for October delivery, the global benchmark, were seen 25 cents lower from their Friday close and changing hands at $58.28 per barrel while WTI contracts for September, which are more tightly linked to U.S. gas prices, were marked 36 cents lower at $54.14 per barrel.