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Dow Futures Slide On Growth Concerns; Dollar Rallies From Two-Year Trough

With U.S. stocks at or near all-time highs Friday, data from major economies around the world suggest an uneven second half recovery as global coronavirus infections pass 22.5 million.

The Friday Market Minute

  • Global stocks mixed as data continues to indicate uneven recovery paths in major economies around the world.
  • Eurozone PMI falls sharply in August, with services leading the decline, putting downward pressure on the euro.
  • The U.S. dollar rebounds from multi-month lows in a defensive session, while China's yuan rises to a 7-month high.
  • Oil slips lower on demand concerns as the dollar rallies, while gold extends declines to trade at 1,933.00.
  • Tesla shares jump past $2,000 ahead of its five-for-one split, which will be assigned to investors of record today and distributed on August 28.
  • U.S. equity futures suggest softer open on Wall Street despite stronger-than-expected earnings from Deere & Co. and Foot Locker and ahead of July existing home sales at 10:00 am Eastern time.

Wall Street futures slumped lower Friday as investors looked to signals of a weakening recovery in Europe, along with a stalled job market at home, while tracking record and near-record highs for the three major benchmarks.

A key reading of economic activity around the Eurozone fell sharply in August, IHS Markit said Friday, with the broadest index pegged at 51.6 points. That's firmly above the 50 mark that separates growth from contraction, but a stark difference from the 54.9 tally recorded over the month of July.

The Eurozone reading, which comes amid flare-ups in new coronavirus infections around the region, fresh travel restrictions among member states and renewed business closures, suggests a bumpy recovery for the world's biggest economic bloc over the second half of the year.

The data also suggest that U.S. growth, which has tapered in August, could be just as uneven in the months ahead and largely dependent, as the Federal Reserve cautioned Wednesday, on the scale of the pandemic and the timing of renewed fiscal stimulus from lawmakers in Washington.

Yesterday's reading of weekly jobless claims, which rose past 1.1 million, and a weaker-than-expected outcome from the Philly Fed business index added to concerns that while stocks are near record highs, they aren't necessarily reflecting a so-called V-shaped recovery in the broader economy.

Wall Street futures still appear largely resistant to those concerns, however, and despite a weaker open predicted for Friday's session, are still within striking distance of their all-time peaks.

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Contracts tied to the Dow Jones Industrial Average, which has gained around 5% so far this month, suggest a 145 point opening bell decline while those linked to the S&P 500, which has surged more than 51% since its March 23 nadir, is priced for a 20 point pullback. The Nasdaq Composite index, which closed at its 35th record high of the year last night, is poised to fall 45 points lower at the opening bell.

The U.S. dollar index, which tracks the greenback against a basket of its global currency peers, was marked 0.606% higher on the session at 93.399 -- taking its three-day gain to 1.4% -- while benchmark 10-year Treasury bond yields fell to 0.625% in early New York trading.

European stocks were mixed, with tech keeping the Stoxx 600 from slipping deeper into the red on the session, although the benchmark was down 0.03% by mid-morning following the weaker PMI data while Britain's FTSE 100 fell 0.2% in London.

Global oil prices were tipped lower by the dollar's overnight rebound, as well as ongoing concerns for world energy demand over the second half of the year as data continues to show uneven recovery paths in major economies.

WTI contracts for October delivery, the new U.S. benchmark, traded 31 cents lower from their Thursday close in New York and were changing hands at $42.51 per barrel in early European dealing while Brent contracts for October, the global benchmark, were seen 25 cents lower at $44.65 per barrel.

Overnight in Asia, Japan's Nikkei 225 rode last night's tech stock rally on Wall Street to close 0.17% on the session at 22,920.30 points, although the benchmark is still down 1.58% for the week amid signals of slowing growth and spiking coronavirus infection rates.

The region-wide MSCI ex-Japan index, meanwhile, rose 0.87% heading into the final hours of trading, supported by Friday gains for stocks in Shanghai and Shenzen as well as a firm rebound from yesterday's sell-off in South Korea.