The Tuesday Market Minute
- Global stocks steady as investors use a lull in U.S.-Iran tensions to climb cautiously back into risk markets following three days of declines.
- Improving PMI services data from Europe and the U.S., expected to be confirmed by today's December ISM reading, gives investors a window to return to beaten-down stocks.
- Global oil prices ease as the U.S. dollar bumps higher ahead of API data later today that is expected to show another decline in domestic crude stocks.
- U.S. Treasury bond yields rise amid a hefty $156 billion in weekly supply and concern that still-elevated crude prices could stoke near-term inflation concerns.
- Wall Street futures suggest modest opening bell declines ahead of ISM data at 10:00 am Eastern Time.
U.S. equity futures edged lower Tuesday, while global stock markets steadied amid a retreat in crude oil prices, as investor concern for further escalation of tensions between Washington and Beijing faded and focus shifted to improving growth prospects in the world's biggest economies.
A sharp overnight pullback in global crude prices gave investors the breathing space to climb back in to risk markets following three sessions of declines as the rhetoric between the U.S. and Iran eased despite simmering resentment for the January 3 killing of Major General Qassem Soleimani.
While President Donald Trump -- who directly ordered the killing last week -- and Iranian leader Hassan Rouhani traded barbs on Twitter, there appeared to be no escalation in threats between the two as attention shifted to a U.S. military error that allowed a draft letter indicating troop withdrawl from Iraq to find its way to the Iraqi Defence Ministry's Combined Joint Operations.
U.S. Army General Mark Milley, chairman of the military's Joint Chiefs of Staff, told reporters Monday that there were no plans to remove the 5,000 American troops currently stationed in Iraq, but the letter underscored the risk that miscommunication could have on such a sensitive -- and dangerous -- conflict in the Gulf region.
That said, with markets looking cheap after three days of selling and PMI data from Europe and the United States showing improvements in service sector activity -- which is likely to be confirmed by the December ISM reading at 10:00 am Eastern Time -- investors used the lull in Gulf tensions to cautiously return to global stocks.
U.S. equity futures look set for a modestly firmer open Tuesday, with contracts tied to the Dow Jones Industrial Average priced for a 28 point decline and those linked to the S&P 500 suggesting a 2.5 point dip for the broader benchmark.
Government bond yields were also on the rise overnight, although it was unclear if the moves were linked to improving market sentiment, the prospect of near-term inflation from elevated crude prices or the hefty schedule of U.S. Treasury bond sales, which are expected to top $156 billion this week.
Benchmark 10-year U.S. Treasury note yields inched back over the 1.8% mark in overnight trading, while 2-year note yields, which are more sensitive to the prospect of rate hikes from the Federal Reserve, rose to 1.551%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was seen 0.1% higher at 96.76, a move that pushed the Japanese yen lower and allowed for a solid 1.6% gain for the Nikkei 225 in overnight Asia trade.
European stocks were also firmer by mid-day in Frankfurt, with the Stoxx 600 rising 0.5%, lead to the upside by technology and banking stocks and paced by a 1% gain for the DAX performance index in Germany.
Britain's FTSE 100 was marked 0.18% higher in London, as gains for the export-focused index were capped by a firmer pound, which traded at a two-week high of 1.3145 against the U.S. dollar.
Global oil prices, meanwhile, eased in concert with the stronger dollar as investors booked profits from three consecutive session gains ahead of data from the American Petroleum Institute later today which is expected to show another decline in domestic U.S. crude stocks.
Brent crude futures contracts for February delivery, the global benchmark for pricing, were last see seen 51 cents lower from their Monday close in New York and trading at $68.40 per barrel, still near the highest level since the days following September's missile strike on a Saudi Aramco tanker in the Strait of Hormuz, which were largely accepted to have been carried out by Iran.
WTI contracts for the same month, which are more tightly-linked to U.S gasoline prices, were marked 41 cents lower at $62.86 per.