The Tuesday Market Minute
- Global stocks slide as investors look to the economic costs of the coronavirus pandemic amid a sharp downgrade for European growth forecasts.
- European Commission slashes 2020 GDP estimates, and trims its forecast for a 2021 rebound, citing the 'still rising' rate of global infections.
- US deaths top 130,000, with confirmed cases approaching 3 million, as states pause or reverse re-opening plans amid a relentless summer infection spike.
- Oil prices retreat as the dollar rises against its global peers, with API and EIA domestic crude stock estimates in focus.
- U.S. equity futures suggest a weaker open on Wall Street ahead of Redbook retail sales data at 8:55 am Eastern time and JOLTS job openings data for May at 10:00 am Eastern time.
U.S. equity futures slipped lower Tuesday, while the dollar posted solid gains against its global currency peers, as investors shifted focus to both the economic cost of the coronavirus pandemic and the relentless rise of infections in the world's largest economy.
European Commission officials slashed their 2020 growth forecasts for the bloc earlier Tuesday, predicting a year-on-year GDP contraction of 8.7%. The European executive also trimmed its estimate for a 2021 rebound, raising questions as to the ability for major economies to perform a so-called V-shaped recovery when the pandemic finally wanes.
Little evidence in the U.S. suggests that moment will come anytime soon, however, as the coronavirus death toll tops 130,000 -- a figure that the Centers for Disease Contral estimates could reach 160,000 by the end of the month -- and overall infections near the 3 million mark.
Underlying economic trends remain solid, however, with last week's record jobs increase for June of 4.8 million, and yesterday's stronger-than-expected reading of the service sector industry illustrating the chances of a V-shaped comeback if and when COVID-19 infections slow and key state re-opening plans are allowed to resume.
However, with California, Florida and Texas pulling in the re-opening reins following five consecutive July days with record infection spikes, and an uncharted second quarter earnings season rapidly approaching, investors look set to book profits from Wall Street's recent run as they head into today's trading session.
Contracts tied to the Dow Jones Industrial Average suggest a 240 point pullback for the 30 stock average, which is up nearly 1.9% for the month, while those linked to the S&P 500 are indicating a 22 point retreat for the broader benchmark, which is still down 1.6% for the year.
Contracts tied to the Nasdaq Composite index, which hit another record high yesterday and has advance more than 21.4% so far this year, are priced for a 30 point slide.
The U.S. dollar index, meanwhile, was marked 0.3% higher against a basket of six global currencies at 97.035, a move which normally precedes sharp single-day declines in domestic equities. Benchmark 10-year Treasury note yields, meanwhile, rallied to 0.668% in a defensive overnight trading session.
European stocks were also firmly in the red, following both the European Commission's grim GDP forecasts and a weaker-than-expected reading for May industrial output from Germany.
The Stoxx 600 benchmark, which is down 11.6% for the year, was marked 1% lower in the opening hours of trading in Frankfurt, lead to the downside by a 1.2% decline for the DAX performance index and a 1.2% retreat for the FTSE 100 in London.
Global oil prices reversed, as well, ahead of domestic crude stock data from the American Petroleum Institute later today and pulled down by the overnight surge in the U.S. dollar.
WTI contracts for August delivery, the U.S. benchmark, traded 39 cents lower from their Wednesday close in New York and were changing hands at $40.24 per barrel in early European dealing while Brent contracts for August, the global benchmark, were seen 39 cents lower at $42.71 per barrel.
Overnight in Asia, the region-wide MSCI ex-Japan benchmark was seen 0.71% lower heading into the final hours of trading, even as stocks in China held onto gains from yesterday's surge, as declines in Hong Kong, Australia and South Korea pulled the area lower amid concerns for the fate of the island protectorate as Beijing tightens its grip on security.
Japan's Nikkei 225, meanwhile, ended the session 0.44% lower as the yen slipped to 107.68 against the strengthening U.S. dollar.