The Tuesday Market Minute
- Global stocks drift lower as a move to blacklist eight China tech companies, and CCTV's decision to suspend NBA broadcasts following a pro-democracy Tweet from the Houston Rockets' GM earlier this week, casts a pall over trade talks in Washington.
- Commerce Department prevents eight firms from buying U.S components, citing human rights violations against ethnic Muslims in China.
- Trade talks being Thursday in Washington, with economic adviser Larry Kudlow suggest U.S. is "open" to any kind of deal China brings to the table.
- European stocks edge higher, with tech leading the advance, after a stronger-than-expected third quarter profit forecast from Samsung Electronics.
- US equity futures suggest a solid on Wall Street, with the Dow called 170 points lower ahead of factory gate inflation data at 8:30 am Eastern time.
Global stocks slumped lower Tuesday, while U.S. equity futures suggested a notably weaker open on Wall Street, as investors eyed a move to blacklist several China-based tech companies that could affect this week's crucial trade talks in Washington.
Sentiment was further bruised by a move from China's state-controlled broadcaster, CCTV, to suspend NBA games in the world's largest market as the row following a pro-democracy Tweet from Houston Rockets' general manager Daryl Morey continues to escalate.
The Commerce Department unveiled the blacklist late Monday, targeting China-based tech firms operating in the artificial intelligence space that were deemed to have been "implicated in human rights violations and abuses in the implementation of China's campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups."
The censure prevents the eight firms from buying components from U.S. firms without prior government permission, but perhaps more importantly comes just days ahead of high-level trade talks between the world's two largest economies in Washington and could spark reprisals against U.S firms from Beijing.
With few tier-one data releases over the next few days, and third quarter earnings not fully kicking into gear until next week, investors are tightly focused on the talks, which represent only the second time senior officials from both sides have met since June.
White House Economic Adviser Larry Kudlow told reporters in Washington Monday that progress has been made ahead of the talks, adding the U.S. was open to any deal China brings to the table, after reports suggested Beijing is no longer interested in a broad-based agreement after more than a year of wrangling with the Trump Administration.
U.S. equity futures suggest a cautious start to the trading session, following solid overnight gains in Asia and weaker share in Europe, with contracts tied to the Dow Jones Industrial Average indicating a 200 point opening bell decline and those linked to the S&P 500 suggesting an 23.5 point pullback for the broader benchmark.
Benchmark 10-year Treasury bond yields rallied in safe-having trading in Europe, taking 10-year notes to 1.52%, even as primary dealers made room for the $193 billion in new bonds being sold this week as the government continues to fund its near-record $1.067 trillion deficit. Around $78 billion in 3-year, 10-year and 30-year paper is scheduled to be auctioned this week, alongside T-Bill sales.
European stocks opened modestly higher in Frankfurt, but gave back gains quickly as the Stoxx 600 benchmark fell 0.92% by mid-day in Frankfurt and Germany's trade-sensitive DAX performance index slumped 1.1% even as the country's statistics office said industrial output in the region's biggest economy grew 0.3% over the month of August.
Overnight in Asia, stocks booked solid gains as markets in China re-opened from a week of holidays marking the 70th anniversary of Communist Party rule, with investors mostly shrugging off the lowest reading for China's services sector in seven months in September.
Japan's Nikkei 225 rose 0.99% to close at 21,587.78 points as the yen eased to 107.34 against the U.S. dollar, while South Korea's KOSPI index jumped 1.38% thanks in part to a better-than-expected third quarter profit forecast from Samsung Electronics (SSNLF) .
Global oil prices reversed earlier gains as investors shed positions on trade-related risk ahead of data from the American Petroleum Institute later today which is expected to indicate an increase in domestic crude stocks.
Brent crude contracts for December delivery, the global benchmark, were seen 25 cents lower from Monday's New York close to trade at $58.10 per barrel while WTI contracts for November delivery, which are more tightly linked with U.S. gasoline prices, were marked 32 cents lower at $52.43 per barrel.