The Wednesday Market Minute
- Global stocks book tech-lead gains following last night's rally on Wall Street, even as economic activity wanes in the wake of a coronavirus resurgence.
- European PMI data shows meagre growth in the world's biggest economic block as lockdown orders and travel restrictions hammer services activity.
- Tech in focus Wednesday as state attorneys general meet President Donald Trump to talk about changing content liability laws.
- U.S. equity futures suggest a mixed open on Wall Street ahead of September PMI data at 9:45 am Eastern time and Fed Chairman Jerome Powell's second day of Congressional testimony at 10:00 am Eastern time.
U.S. equity futures traded mixed Wednesday, while the dollar scaled to a one-and-a-half month high as investors continue to worry about the resurgence in coronavirus cases in Europe and the potential for more political influence on markets heading into the November elections.
Europe's renewed coronavirus lockdowns, following infection spikes in Spain, France and the United Kingdom, took its toll on economic activity this month, according to PMI data published by Markit, with the dominant services sector sliding into contraction and the overall reading of 50.1 nudging just barely above the level that signals growth in the world's biggest economic block.
"Encouragement comes from a further improvement in companies' expectations for the year ahead, but this optimism often rests on infection rates falling, which remains far from guaranteed for the coming months," said Markit's chief economist Chris Williamson.
The sputtering growth figures could offer an early signal on U.S. activity in the months ahead if coronavirus infections accelerate as colder weather brings more people inside. In fact, that already appears to be happening, with daily cases rising by 14.5% compared to the previous week, and hospitalizations on the rise.
Those realities might be reflected in the recent gains for stay-at-home tech stocks such as Apple (AAPL) - Get Report, Amazon (AMZN) - Get Report and Facebook (FB) - Get Report, which have been pacing gains on Wall Street in both yesterday's rally and this morning's upside move for U.S. equity futures.
Contracts tied to the Dow Jones Industrial Average suggest a 125 point opening bell gain for the average, with the S&P 500 priced for a 1 point bump. Nasdaq Composite futures, meanwhile, look set for a modest decline at the start of trading thanks in part to a 5% slide for Tesla, which continues to slump lower following its Battery Day event yesterday in Palo Alto.
Tech is likely to be in focus today for a secondary reason, as reports suggest President Donald Trump will meet with several state attorneys general to potentially discuss removing the so-called liability shield some companies use to isolate themselves from user content.
Nike (NKE) - Get Report shares are also likely to reflect at least a portion of the tech/coronavirus narrative, after the sportswear giant blasted Street forecasts for its first quarter earnings thanks to an 82% surge in digital sales, which now represent around a third of the group's $10.6 billion in revenues.
Nike shares were marked 12% higher in pre-market trading and look set to open at an all time high of $131.00 each.
In Europe, weaker domestic currencies boosted export-focused stocks, while tech gave a solid lift to a smaller portion of each benchmark, even as the broader economy looks worryingly close to returning to recession.
The Stoxx 600 Europe benchmark, the broadest measure of regional share prices, was marked 1.2% higher in early trading as the euro slipped to a multi-week low of 1.1688 against a firmer greenback. Britain's FTSE 100, meanwhile, jumped 2% as the pound fell to July lows of 1.2722 amid renewed lockdown orders in major cities unveiled late yesterday by Prime Minister Boris Johnson.
Global oil prices managed to shrug off the stronger dollar, however, ahead of an Energy Department report on domestic U.S. inventories later this morning, although demand concerns continue to weigh on the market following last week's 10% rally that has kept U.S. crude prices just north of $40 per barrel.
WTI contracts for October delivery, the U.S. benchmark, traded 30 cents higher from their Tuesday close in New York at $40.10 per barrel in early European dealing while Brent contracts for November, the new global benchmark, were seen 38 cents higher at $42.10 per barrel.
Overnight in Asia, Japan's Nikkei 225 resumed trading following two-days of national holidays, but was little changed at 23,346.49 points by the close of a cautious session, while the region-wide MSCI ex-Japan benchmark nudged 0.3% higher heading into the final hours of trading.