Dow Futures Slide, Dollar Lags After Fed Decision; Trade and Election Risk Cap Gains

Wall Street looks set for modest gains Thursday as investors price in rate support from the Fed while eyeing headline risks on U.S.-China trade talks and Parliamentary elections in Britain.
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The Thursday Market Minute

  • Global stocks grind higher after a dovish decision on interest rates from the Federal Reserve, with gains held back by headline risks from UK elections and U.S.-China trade.
  • Fed Chair Powell says U.S. economy in "good shape" heading into 2020 as colleagues vote unanimously to hold rates steady at 1.5% to 1.75%.
  • President Trump will meet his senior trade team in Washington today to discuss the fate of December 15 tariffs on $160 billion in China-made goods that could escalate tensions in the 18-month long trade dispute.
  • Britons head to the polls for the third time in four years to both elect a new Prime Minister and potential unlock the country's ongoing Brexit stalemate
  • Wall Street futures suggest modest opening bell gains ahead of producer price inflation and weekly jobless data at 8:30 am Eastern time and  earnings from Costco, Oracle and Broadcom after the close of trading.

U.S. equity futures nudged lower Thursday, while the dollar languished against a basket of its global peers, as investors priced in the effects of accommodative signals from the Federal Reserve's rate decision while waiting for hard results from a contentious U.K. election and stalled U.S.-China trade negotiations.

Fed Chairman Jerome Powell and his colleagues voted unanimously yesterday in Washington to keep the country's benchmark interest rate unchanged while signalling little chance of a near-term move as the economy -- and most importantly, jobs and inflation -- continues to perform. 

"Our economic outlook remains a favorable one, despite global developments and ongoing risks," Powell said . "As the year progressed we adjusted the stance of monetary policy to cushion the economy and provide some insurance.  This shift has helped support the economy and has kept the outlook on track."

With the Fed decision out of the way, and the Open Markets Committee seemingly on the same page in terms of its projections for near-term interest rates, markets are now likely to focus on the two remaining headline risks heading into the final weeks of the trading year.

The first and most significant could see movement today as President Donald Trump meets with his most senior trade advisers -- including USTR head Robert Lighthizer and Treasury Secretary Steve Mnuchin -- at the White House as he mulls whether to apply or delay tariffs on around $160 billion worth of China-made goods that are set to kick-in on December 15.

Media reports suggest Trump could opt to apply the levies, which are largely focused on consumer goods, given that he is unhappy with China's lack of co-operation on agricultural purchases, but hasn't fully made up his mind on what could be the most contentious of moves in the 18 month trade war.

Wall Street futures appear modestly pessimistic heading into the opening bell, with contracts tied to the Dow Jones Industrial Average indicating a 45 point dip against those linked to the S&P 500, which suggest a 2 point dip for the broader benchmark.

General Electric (GE) - Get Report shares were a notable pre-market mover, extending their year-to-date gain past 50%, after analysts at UBS predicted a 2020 'inflection point' for the company and its ongoing turnaround under CEO Larry Culp.

Meanwhile, Britons will head to the polls today in the United Kingdom for the third time in four years to elect a new government -- and Prime Minister -- that could either end the country's ongoing Brexit deadlock or plunge it back into constitutional and political crisis.

Opinion polls suggest incumbent leader Boris Johnson held a solid lead int today's vote, but the margin for error in most of the readings raise the prospect of a so-called hung Parliament in which neither of the main parties will gather the requisite 326 seats needed to command a majority.

The U.K. pound climbed to near three-year highs in overnight trading in anticipation of today's vote, holding back gains for the FTSE 100, which rose 0.62% by mid-day trading in London.

The weaker U.S. dollar, which traded at the lowest levels since July, lifted the euro to 1.1133 ahead of today's European Central Bank meeting in Frankfurt -- the first under new President Christine Lagarde -- and held back gains for the Stoxx 600, which was marked 0.05% lower by mid-afternoon trading.

Global oil prices were also marked modestly higher, thanks in part to a weaker greenback and a surprise assessment from OPEC researchers, which pointed to a global crude deficit next year despite record high production rates and increasing inventory levels in the United States.

Brent crude contracts for February delivery, the global benchmark, were seen 51 cents higher from their Wednesday close and trading at $64.23 per barrel, while WTI contracts for the same month were marked 32 cents higher at $58.97 per barrel.