Dow Futures Edge Higher Amid Fed Caution on Recovery; Gold Tops $1,800 For First Time Since 2011

With U.S. coronavirus infections topping 3 million, and modelling that suggests deaths could hit 200,000 by November, Fed Presidents are starting to question the strength of the recent economic recovery.

The Wednesday Market Minute

  • Global stocks mixed as investors question the strength of coronavirus recoveries in major economies as infections rise and lockdowns resume.
  • U.S. infections top 3 million as southern and western state cases spike, adding to fresh concerns for spending and investment over the summer months.
  • Fed Presidents hint a more stimulus, while questioning the strength of the U.S. economic recovery.
  • Gold passes the $1,800 mark for the first time since November 2011 as governments mull more coronavirus spending and central banks hint to further balance sheet expansion. 
  • U.S. equity futures suggest a flat open on Wall Street ahead of mortgage data at 7:00 am Eastern time.

U.S. equity futures traded modestly higher Wednesday, while global stocks were mixed and the dollar slipped lower, as investors continue to question the potential for a quick economic recovery in the face of rising coronavirus infections and fresh lockdown orders around the world. 

Atlanta Federal Reserve President Ralph Bostic told a business panel yesterday that 'business leaders are getting worried and consumers are getting worried' with respect to the resurgence in U.S. infections, which topped the 3 million mark yesterday. "There is a real sense this might go on longer than we have planned for,' he added.

Bostic's remarks were somewhat softened by his colleague, Fed Vice Chair Richard Clarida, who told CNN International that "there's more that we can do, there's more that we will do" in terms of monetary accommodation if the economic recovery were to stall in the coming weeks. 

However, with Fed officials sounding the alarm, infections in the southern and western U.S. states rising and Redbook retail sales data showing a sharp pullback in consumer spending last week as governors imposed new restrictions on gatherings and businesses, risk market sentiment is beginning to turn, as evidence by yesterday's 400 point decline for the Dow Jones Industrial Average.

Futures contracts tied to the Dow suggest only a modest change Wednesday, with a 36 point opening bell gain priced in, while those linked to the S&P 500 are indicating a 2 point bump to the upside for the broader benchmark. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies and typically moves in the opposite direction of stocks in pre-market trading, was little-changed from last night's levels at 96.82, even as investors are showing signs of pricing in more Fed and government stimulus for the months ahead. 

Benchmark 10-year U.S. Treasury bond yields, meanwhile, were marked modestly lower at 0.653% while spot gold topped the $1,800 per ounce mark for the first time since November 2011.

European stocks were also trading with caution Wednesday, held down in part by weakness for the region's banks and a modestly firmer euro, which trimmed the near-term value of export-focused companies on exchanges in Germany and France. 

The Stoxx 600 benchmark was pegged 0.35% lower in the opening hours of trading, lead by a 0.75% decline for the CAC-40 in Paris, while Britain's FTSE 100 slipped 0.11% ahead of a budget statement from the government that could include new  spending to target youth job creation.

Global oil prices were also little-changed from last night's closing levels, with traders focuses on today's Energy Department data on crude stocks following an estimate from the American Petroleum Institute yesterday that showed a surprise 2.05 million barrel increase, taking the overall total to 539 million barrels.

 WTI contracts for August delivery, the U.S. benchmark, traded 2 cents higher from their Tuesday close in New York and were changing hands at $40.62 per barrel in early European dealing while Brent contracts for August, the global benchmark, were seen 5 cents higher at $43.13 per barrel.

Overnight in Asia, China stocks rose for a seventh consecutive session, boosted by government statements that suggested near-term support for state-controlled businesses. The moves helped lift the MSCI ex-Japan benchmark to a late-session gain of 0.57%, contrasting a 0.78% decline for the Nikkei 225 in Tokyo.