The Thursday Market Minute
- Global stocks slide as coronavirus infection rates remained elevated in the United States and investors shrug-off stronger-than-expected GDP data in China.
- China Q2 GDP rises 3.2%, but June retail sales fall for the fifth consecutive month, underscoring fragility in world's second-largest economy.
- U.S. infections rise by 67,100, the second-highest on record, taking the overall total past 3.5 million as states re-think re-opening plans.
- U.S. retail sales rise 7.5% in June, against a market forecast of 5.2%, while jobless claims hold steady at 1.3 million for the week ending July 11.
- European stocks weaker after ECB rate decision, while the dollar edges higher as traders take a cautious stance heading into the Thursday session.
- U.S. equity futures suggest a weaker open on Wall Street after earnings from Johnson & Johnson, Morgan Stanley and Bank of America.
Wall Street futures slipped lower Thursday, while the dollar regained its footing and oil prices slumped, as markets reacted to mixed economic data from China, tensions between Washington and Beijing and near-record coronavirus infection rates in the United States.
U.S. retail sales for the month of June surged 7.5% from last year, the Commerce Department said, a gain that matched the record job creation data for the past month. However, jobless claims for the week ending July 11 held at 1.31 million, suggesting stalled re-opening plans could increase unemployment rolls.
The breadth of the pandemic in the world's largest economy, which has infected more than 3.5 million people and killed at least 137,000, is showing little sign of abating this week as new cases topped 67,300 yesterday, according to CDC data, and state governors continue to pause or reverse re-opening plans.
Stronger-than-expected bank earnings, however, as well as hopes of fresh fiscal stimulus from Washington and a near-term vaccine breakthrough have kept markets aloft for most of the month, pulling the S&P 500 to within a whisker of positive territory for the year following last night's close.
Better-than-expected GDP data from China this morning, which showed the world's second-largest economy rebounding 3.2% over the three months ending in June, could have added to that optimism, but investors were unsettled by the fifth consecutive monthly decline in retail sales in June, as well as the troubling rise in tensions between Washington and Beijing, which is set to include further sanctions on travel for senior government figures are more restrictions on the kind of business Huawei Technologies can do with U.S. companies.
With a handful of bank and blue-chip earnings slated for Thursday, and the European Central Bank making no change to either its key policy rates or its €1.35 trillion quantitative easing program, traders are looking decidedly cautious heading into the opening bell after the weaker-than-expected weekly jobless claims data.
Contracts tied to the Dow Jones Industrial Average, which is up 4.1% for the month of July, are price for a 210 point retreat while those linked to the S&P 500, which is down only 0.13% for the year, suggest a 24.5 point opening bell decline.
The broader market caution helped lift the U.S. dollar index, which gauges the greenback against a basket of six global currencies, and pushed benchmark 10-year Treasury note yields modestly lower, to 0.609%, in overnight trading.
The dollar strength, as well as OPEC's decision to taper its output cuts by 2 million barrels per day, to 7.7 million, starting in August, pulled global oil prices lower, although the declines were capped by Energy Department data yesterday that showed a bigger-than-expected decline in U.S. crude stocks of 7.5 million barrels last week.
WTI contracts for August delivery, the U.S. benchmark, traded 52 cents lower from their Wednesday close in New York and were changing hands at $40.68 per barrel in early European dealing while Brent contracts for August, the global benchmark, were seen 38 cents lower at $43.41 per barrel.
European stocks were also on the back foot following the ECB rate decision at 7:45 am Eastern time, held down by weak second quarter earnings for regional blue-chips and the limp retail sales data out of China.
The Stoxx 600 benchmark fell 0.6% by mid-day trading , with a 0.55% slide for Germany's DAX performance index and a 0.4% slip for the FTSE 100 in London.
Overnight in Asia, China stocks were pummeled, falling the most in five months, as the stronger-than-expected second quarter GDP rebound raised the prospect of slowing government stimulus, which has played a huge part in the domestic market's post-coronavirus rebound.
China's Shanghai Composite slumped 4.5%, while the tech-focused CSI300 in Shenzen slumped 4.8% , pulling markets around the region lower and hauling the MSCI ex-Japan benchmark to a 1.75% decline heading into the final hours of trading. Japan's Nikkei 225, meanwhile, closed 0.76% lower at 22,770.36 as Tokyo braces itself for a possible flare-up of coronavirus infections.