The Wednesday Market Minute
- Global stocks stall following a warning from the White House on the state of the country's coronavirus pandemic and ahead of key tech earnings later this week.
- President Donald Trump says virus outbreak will 'get worse before it gets better' during his newly-revived press briefing in Washington yesterday.
- Gold prices hit a near nine-year high in overnight trading, while benchmark 10-year Treasury note yields drop below 0.6% in a defensive overnight session.
- Oil prices slip as the dollar holds gains and the API reports a bigger-than-expected 7.5 million barrel increase in domestic crude stocks.
- U.S. equity futures suggest a softer open on Wall Street ahead of earnings from CSX and Las Vegas Sands as well as housing data at 9:00 am and 10:00 am Eastern time.
U.S. equity futures edged lower Wednesday, while gold scaled the highest levels in nearly nine years and defensive assets rallied, as investors worried over the looming stimulus spending deadlock in Washington and a reversal of tone on the coronavirus pandemic from President Donald Trump.
With key earnings from Microsoft (MSFT) - Get Report and Tesla (TSLA) - Get Report not slated until after the close of trading today, and markets likely to key on progress in talks between Democrat and Republican lawmakers in Washington over the $2 trillion gap in their respective coronavirus rescue packages, Wednesday's session is likely to take on a defensive tone, as evidenced by an overnight rally in gold prices and benchmark 10-year U.S. Treasury bond yields, which fell to 0.589% in early European dealing.
President Trump's uncharacteristically pessimistic press briefing yesterday, during which he urged younger people to stay at home more often, wear masks more frequently and practice social distancing, also highlighted the country's struggle to slow the spread of the virus, which has infected more than 15 million people around the world and killed nearly 620,000.
“We will defeat the virus,” Trump told reporters in Washington at his newly-revived daily pandemic briefing. “It will probably, unfortunately, get worse before it gets better ... something I don't like saying about things, but that's the way it is."
A relatively quiet earnings session -- at least before the start of trading -- and the concern over a lack of progress in stimulus talks in Washington, which Senate Democratic leader Chuck Schumer described as 'broad concepts' that were 'not close to getting ready to negotiate' will likely keep stocks on the back foot Wednesday, with a focus on housing and mortgage data before the opening bell.
Futures contracts tied to the Dow Jones Industrial Average suggest a 60 point retreat at the start of trading, while those linked to the S&P 500, which remains in modestly positive territory for the year, are priced for a 3.3 point pullback.
Gold prices rallied to the highest levels since September 2011 overnight, touching $1,865.35 per ounce before easing to $1,859.00 per ounce shortly after, as traders looked at yesterday's €1.85 trillion budget and stimulus package from European leaders yesterday as potentially igniting near-term inflation in the world's biggest economic bloc.
Currency markets reacted differently, however, with the euro rising to a one-year high of 1.1576 against the U.S. dollar on hopes that the newly-agreed stimulus would trigger much-needed spending and investment around the 27 member states.
European stocks were weaker as a result, with the Stoxx 600 sliding nearly 1% in the opening hours of trading, after scaling 15-month highs in Frankfurt on Tuesday, lead to the downside by a 0.84% slide for the FTSE 100 in London and a 0.6% dip for the DAX performance index in Germany.
The U.S. dollar managed to hold onto modest gains against its major currency peers, despite the euro's rally, and that helped push global oil prices lower in the early session, as did last night's data from the American Petroleum Institute, which showed a 7.5 million barrel increase in domestic crude stocks.
WTI contracts for August delivery, the U.S. benchmark, 62 cents lower from their Tuesday close in New York and were changing hands at $41.30 per barrel in early European dealing while Brent contracts for September, the global benchmark, were seen 57 cents lower at $43.75 per barrel.
Overnight in Asia, the market's defensive tone pushed stocks lower around the region, with the MSCI ex-Japan benchmark falling 1% into the close of trading and Japan's Nikkei 225 ending 0.58% lower at 22,271.61 points.