Dow Futures Lower As Coronavirus Resurgence Tests Global Recovery; Bonds Rally as Investors Spurn Risk Markets

U.S. coronavirus infections hit record highs for the sixth consecutive day, with fatalities rising in Florida, Texas and California, as the pandemic continues its resurgence through the world's largest economy.

The Friday Market Minute

  • Global stocks mixed a coronavirus infection resurgence raises recovery doubts, triggers flight-to-safety moves in overnight trading.
  • U.S. infections top 60,500 yesterday, with Florida, Texas and California reporting record fatality rates as the virus rips through the southern and western states.
  • Benchmark 10-year Treasury note yields fall below 0.6% as cautious investors retreat from risk markets: 30-year auction draws second lowest yield on record Thursday.
  • Oil prices retreat on demand concerns, even as IEA boosts global daily consumption forecast to 92.1 million barrels.
  • U.S. equity futures suggest a weaker open on Wall Street ahead of factory gate inflation data for June at 8:30 am Eastern time.

Wall Street futures slipped lower again Friday, while Treasury bond yields tumbled amid a flight to risk-free assets, as investors continue to track the COVID-19 resurgence and its impact of the global economic recovery. 

U.S. infections hit another record high Thursday, with 60,500 cases confirmed around the country, while Florida, Texas and California all revealed their highest levels of coronavirus-linked fatalities since the outbreak began earlier this year. 

New lockdown orders in Australia, meanwhile, as well as rapidly increasing infection rates in South America and localised outbreaks in Europe, suggest the virus will continue to linger through the summer months and blunt the improvements seen in manufacturing output and consumer spending witnessed in major economies around the world. 

In the U.S., where 33 million people remain on unemployment rolls despite the lowest weekly jobless claim tally in four months on Thursday, investors are plowing cash into risk-free Treasury bonds, taking yields on benchmark 10-year notes below 0.6%, and paying near-record low levels for 30-year paper during yesterday's $19 billion auction.

The reluctance to extend risk heading into next week's start of the second quarter earnings season -- which analysts estimate will show a 43% year-on-year decline in profits -- was evident in U.S. equity futures prices Friday, which indicate a 130 point decline for the Dow Jones Industrial Average and a 13 point decline for the broader S&P 500. 

European stocks, however, were holding onto modest gains in the opening hours of trading, with the Stoxx 600 attempting to snap a four-day losing streak with a 0.45% mid-day rise, paced by a 0.4% gain for the DAX performance index in Germany and a similar percentage advance for the FTSE 100 in London.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was little-changed at 96.753, while the euro held at a one-month high of 1.1284 and the pound eased to 1.2587.

Global oil prices extended declines into a second consecutive session, pulling U.S. crude below $40 a barrel, even as the International Energy Agency raised its forecast for global demand by 400,000 barrels, to 92.1 million barrels per day, for the remainder of the year.

WTI contracts for August delivery, the U.S. benchmark, traded 75 cents lower from their Thursday close in New York and were changing hands at $38.87 per barrel in early European dealing while Brent contracts for August, the global benchmark, were seen 69 cents lower at $41.66 per barrel.

Overnight in Asia, China's week-long stock market rally, sparked by an editorial in a state-controlled newspaper Monday, came to a halt with a near 2% decline for the Shanghai Composite as investors took profits from indices trading near the highest levels in five years.

Japan's Nikkei 225, meanwhile, closed 1.06% lower at 22,290.81 points while China' Friday slump, alongside weakness in Hong Kong and Singapore, pulled the region-wide MSCI ex-Japan benchmark 1.07% lower heading into the final hours of trading.