Dow Futures Gain As Congress Ends Stimulus Talks Without A Deal; Gold Hits Fresh All-Time High

The expiration of emergency unemployment benefits, worth around $18 billion, has markets looking to Congress for follow-up stimulus package, but weekend talks passed without a deal and investors are growing concerned.

The Friday Market Minute

  • Global stocks slip lower as coronavirus infection rates and a deadlock on new stimulus from Washington dampens investors sentiment.
  • Stronger-than-expected PMI data from Europe and Asia suggest the potential for solid turnarounds in the coming months, but flare-ups in Britain, Japan and elsewhere keep investors cautious.
  • U.S. lawmakers end weekend talks on fresh cornavirus support spending with a deal, even after unemployment benefits, worth around $18 billion, expired on Friday.
  • Treasury bond yields show little signs of concern from Fitch Ratings outlook change on Friday, while gold hits a fresh all-time high of $1,984.66 per ounce.
  • Oil prices slip despite the stronger PMI data, with U.S. crude trading under $40 a barrel amid new demand concerns.
  • U.S. equity futures suggest a firmer open on Wall Street ahead of earnings from Berkshire Hathaway and  Clorox before the start of trading and ISM activity data at 10:00 am Eastern time.

U.S. equity futures edged higher Monday, while gold tested fresh all-time highs and Treasury yields fell, as investors kicked-off the month in a cautious mood, eyeing stimulus talks in Washington and a coronavirus infection surge in major economies around the world.

Lawmakers on Capitol Hill carried talks on a new stimulus package into the weekend Saturday, and while both sides hailed "good progress' from the meetings, Republicans and Democrats remain at least $1 trillion apart on their proposed bills.

"I'm not optimistic that there will be a solution in the very near term," White House chief of staff Mark Meadows told CBS' "Face the Nation"  "We continue to see really a stonewalling of any piecemeal type of legislation that happens on Capitol Hill,."Hopefully that will change in the coming days."

With the $600 weekly payment now passed -- which, when doled out to the 30 million Americans who qualified amounted to an $18 billion cash injection into the sagging economy -- investors are concerned that any prolonged impasse in Washington could further erode consumer confidence and stifle job creation. 

Against that backdrop, new coronavrius infection rates continue to trend at around 60,000 per day, taking the U.S. total to around 4.75 million, with at least 157,000 deaths since its outbreak earlier this year.

Around the world, infections have risen past 18 million, with at least one million added to the total every four days now that outbreaks are being recorded in Britain, Australia, Japan and many other nations around the Asia region.

Markets, however, have been largely unaffected by both the rise in infections and the economic damage the virus has wrought, with analysts citing the $20 trillion dollars spent by governments and central banks around the world since late March as the principal reason.

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U.S. earnings, however, have also head steady investor nerves, with the collective estimate for the second quarter season improving to a decline of -33.8% from -40.3% last week following a series of blowout reports from tech giants such as Apple  (AAPL) - Get Apple Inc. (AAPL) Report, Amazon  (AMZN) - Get Amazon.com, Inc. Report and Facebook  (FB) - Get Facebook, Inc. Class A Report.

Around 132 S&P 500 companies are expected to report this week, including Walt Disney  (DIS) - Get Walt Disney Company Report, CVS Health  (CVS) - Get CVS Health Corporation Report, Bristol Myers  (BMY) - Get Bristol-Myers Squibb Company Report and Lowes L.

U.S. equity futures, meanwhile, are pointing to a firmer start to the week, with contracts tied to the Dow Jones Industrial Average, which gained 2.38% in July, priced for a 135 point gain and those linked to the S&P 500, which is up 1.25% for the year, suggesting a 20 point bump at the start of trading. 

Benchmark 10-year Treasury note yields were last seen at 0.544% in overnight trading, with investors noting little impact from Friday's move by Fitch Ratings to lower the outlook on its AAA rating to 'negative', from 'stable, citing a surge in new debt linked to tax cuts and coronavirus rescue packages, with the group says could reach 130% of GDP by 2021.

The dollar index, which tracks the greenback against a basket of six global currency peers, was modestly higher at 93.414, but has fallen some 10% since March, when the Federal Reserve started adding trillions to its balance sheet. Gold, meanwhile, hit a fresh all-time peak of $1,984.66 per ounce in overnight trading.

European stocks were on firmer footing to start the session, following PMI data that showed the strongest gains in economic activity since January 2019, but that faded after the first hour of trading as the euro climbed to 1.1776 against the dollar and global market sentiment ebbed heading into the start of the U.S. trading session.

Overnight in Asia, a stronger-than-expected PMI reading from China, one of the strongest in a decade, helped support the Shanghai Composite to a 1.75% gain, although the region-wide MSCI ex-Japan benchmark slipped 0.42% heading into the final hours of trading. Tokyo's Nikkei 225 reversed Friday's declines with a 2.24% advance to close at 22,195.38 points.

Global oil prices were also lower on the session, despite the stronger PMI data from Europe and Asia and the flat U.S. dollar, as investors continue to worry that a flare-up in coronavirus infections will blunt global energy demand in the second half of the year.

WTI contracts for September delivery, the U.S. benchmark, 50 cents higher from their Friday close in New York and were changing hands at $39.77 per barrel in early European dealing while Brent contracts for October, the new global benchmark, were seen 44 cents higher at $43.08 per barrel.