The Thursday Market Minute
- Global socks slip lower as Trump renews China criticism and WHO data shows the largest single-day coronavirus infection increase of the pandemic.
- Trump accuses China of a "massive disinformation' campaign to sway the US election, and again says Beijing deliberately failed to stop the COVID-19 outbreak.
- European PMI data suggests a solid economic rebound in May, but a significant second quarter contraction for the world's biggest economic bloc remains likely.
- Global oil prices extend gains after EIA data shows a surprise 5 million barrel decline in domestic crude stocks, including a big drawdown at the Cushing, Oklahoma delivery hub.
- U.S. equity futures suggest a softer open on Wall Street ahead of Philly Fed data at 8:30 am Eastern time and before-the-bell earnings from Best Buy and TJX Companies.
U.S. equity futures turned lower Thursday, although oil prices and improving economic data offered some downside support, amid a worrying increase in global coronavirus infections in developing economies and a fresh round of China criticism from President Donald Trump.
In a late Wednesday salvo on Twitter, Trump again accused China of having the ability, but declining, to stop the spread of the deadly virus, which has infected more than 5 million people around the world. He also appeared to direct his criticism towards President Xi Xinping, a notable move given that China is heading into two days of annual parliamentary meetings in Beijing.
Trump's most recent attack was followed by data from the World Health Organization, which indicated the biggest single-day increase -- of 106,000 -- in coronavirus infections since the outbreak was first identified earlier this year, as the pandemic begins to take hold in Africa and spreads deeper into South America.
The sudden rise in developing countries contrasts the re-opening plans of major economies around the world, as well as activity data that suggests the pandemic's damage may have reached its peak.
European PMI data for May indicates a big rebound in overall economic activity, with the headline reading rising to 30.5 from 13.6 in April, although all of the numbers continue to point to sharp second quarter contractions and millions in lost jobs.
“The Eurozone saw a further collapse of business activity in May but the survey data at least brought reassuring signs that the downturn likely bottomed out in April," said Chris Williamson, chief economist at PMI compiler IHS Markit. "Second quarter GDP is still likely to fall at an unprecedented rate, down by around 10% compared to the first quarter, but the rise in the PMI adds to expectations that the downturn should continue to moderate as lockdown restrictions are further lifted heading into the summer."
Here in the U.S., weekly jobless claims, as well as data estimating economic activity around the mid-Atlantic region, which are due at 8:30 am Eastern time, could signal a similar 'bottoming out' of the coronavirus downturn, while retail earnings from Best Buy (BBY) - Get Report and TJX Companies (TJX) - Get Report are also expected before the opening bell.
Contracts tied to the Dow Jones Industrial Average suggest a 140 point pullback, following yesterday's solid 370 point rally, while those linked to the S&P 500, which is only down 8% for the year, are indicating a 20 point retreat.
Trillions in Federal Reserve support support, as well as record low interest rates and myriad bank lending programs, is a big reason why U.S. stocks have held up well through the worst of the pandemic, and minutes of the Fed's April interest rate meeting noted its tools have been " essential in helping reduce downside risks to the economic outlook."
In fact, the Fed noted that, "while participants agreed that the current stance of monetary policy remained appropriate, they noted that the Committee could, at upcoming meetings, further clarify its intentions with respect to its future monetary policy decisions," suggesting the potential for more detail forward guidance on interest rates and bond purchases.
The Fed's promised clarity helped the dollar in overnight trading, lifting it 0.2% against a basket of six global currencies to 99.32, while benchmark 10-year Treasury note yields inched modestly lower, to 0.667%.
Oil prices also extended their month-long rally, lifting U.S. crude to the highest levels in six weeks, after the Energy Department reported a 5 million barrel reduction in domestic stocks, including a 5.6 million barrel decline at the key delivery hub in Cushing, Okalahoma.
Brent crude contracts for July delivery, the global benchmark, were seen 71 cents higher at $36.46 per barrel while WTI contracts for the same month -- the new U.S. benchmark -- jumped 76 cents higher to $34.23 per barrel.
European stocks remained firmly in the red, however, despite the improving economic data, as banks continued to lead the market lower amid speculation that the Bank of England could deploy negative interest rates to combat low inflation in the pandemic-hit economy.
Britain's FTSE 100 was marked 1% lower by mid-morning in London while the region-wide Stoxx 600 slipped 0.95% to the downside lead by a 1.5% decline for the trade-sensitive DAX performance index.
Trade was also a factor in the overnight weakness in Asia, were the biggest decline for Japan exports in at least a decade, as well as a softer May PMI rebound, pushed the Nikkei 225 0.21% lower to 20,552.31 points while the MSCI ex-Japan benchmark was last seen 0.22% lower heading into the close of trading.