Dow Futures Slump As U.S. Restrictions on Huawei Stoke China Tensions; April Retail Sales Plunge Most on Record

April retail sales fell 16.4% last month, the most on record, adding to market pressures triggered by escalating trade tensions between Washington and Beijing.

The Friday Market Minute

  • Global stocks gain following stronger-than-expected industrial data from China, although concern over rising tensions between Washington and Beijing kept markets in check.
  • Commerce Department to restrict Huawei access to semiconductors made by U.S. software under the Foreign Direct Product Rule.
  • China's April factory output rose 3.9%, more than double Street forecasts, adding to recent data of a slow but steady turnaround in the world's second-largest economy.
  • German GDP contracts 2.2% in the first quarter, the biggest fall in more than a decade, as lockdowns in Europe's biggest economy kicked-in.
  • Oil prices rise to one-month highs after the surge in China factory output and this week's surprise decline in domestic crude stocks as well as the IEA's forecasts of a modest second half recovery in global demand.
  • U.S. equity futures suggest a weaker open on Wall Street ahead of a busy slate of economic data, including retail sales at 8:30 am, industrial output at 9:15 am and the University of Michigan consumer sentiment reading at 10:00 am Eastern time. 

Wall Street futures slumped lower Friday after a report indicated the White House plans to restrict China-backed Huawei Technologies from accessing U.S. tech markets in a move that could add to further tensions between Washington and Beijing. 

The Commerce Department issued a final 90-day extension that allows Huawei to do business with American firms, but added it will be barred from acquiring semiconductors made with U.S. software under the Foreign Direct Product Rule

The editor of China's influential English-language Global Times newspaper said the decision could lead to retaliation from Beijing.

Apple Inc.  (AAPL) - Get Report shares fell 2.6% in pre-market trading to $301.54 each, while Boeing Co.  (BA) - Get Report was marked 3.75% lower at $117.92 each. 

Ahead of a heavy slate of economic releases, futures contracts tied to the Dow Jones Industrial Average suggest a 240 point decline for the 30-stock average, while those linked to the S&P 500 are indicating a 29.5 point slide 

The Huawei news reversed earlier gains stoked by a stronger-than-expected reading for China's factory output that suggests a slow, but noted, recovery in the world's second-largest economy.

China's industrial output leaped by 3.9% last month, official data Friday indicated, a figure that was more than double Street forecasts and adds to recent readings that suggest the country's re-opening momentum is beginning to gain traction.

The surge offset the weakest quarter-on-quarter contraction for the German economy in more than a decade, which shrank 2.2% over the first three months of the year, and provided early support for stocks on the final trading day of a volatile week that saw the Dow Jones Industrial Average notched an 800 point rally last night to close firmly in the green.

Friday's action is likely to be a bit more muted, however, as traders pick through a grisly reading for April retail sales, which fell 16.4% -- the most on record -- and fret over the fate of U.S.-China relations amid rising tensions over Beijing's handling of the coronavirus outbreak.

Industrial production data follows at 9:15 am Eastern time, with the University of Michigan's consumer sentiment reading set for 10:00 am Eastern time.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.2% lower at 100.28 while benchmark 10-year Treasury note yields were last seen at 0.0619% in early European trading.

Germany's GDP contraction, while largely in-line with forecasts, capped gains for European stocks. although China's factory output surge boosted miners and chipmakers to lead the Stoxx 600 benchmark into a 0.7% gain by mid-morning trade.

Britain's FTSE 100, meanwhile, rose 0.8% as energy stocks gained alongside oil prices, which were boosted by hopes of renewed demand from China factories, and an 8.2% gain for BT shares following a report that the struggling telcom is ready to sell a major stake in its Openreach business division. 

Global oil prices extended their recent rally, lifting U.S. crude to a one-month high, following the better-than-expected China factory data today and the Energy Department's first signal of a decline in domestic crude stocks in at least 15 weeks. 

WTI contracts for June delivery, which expire next week, were marked 55 cents higher at $28.11 while Brent futures for July delivery, which benchmark around 60% of global crude purchases, were marked 60 cents higher at $31.73 per barrel.

Overnight in Asia, the follow-on from Wall Street's 11th hour rally boosted Japan's Nikkei 225, which closed 0.62% higher at 20,037.47 points, while the region-wide MSCI ex-Japan benchmark was last seen 0.2% higher on the strength of gains in Australia and South Korea.