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Dow Futures Turn Lower Ahead of Georgia Senate Run-Offs; COVID Surge, Lockdowns Hit Sentiment

Wall Street will focus on a two special Senate elections in Georgia today that will define both the balance of Congress and the legislative agenda of President-Elect Joe Biden.

The Tuesday Market Minute

  • Global stocks mixed as investors adopt a cautious tone ahead of today's Georgia Senate races and the ongoing surge in coronavirus infections.
  • Georgia's special election will define the composition of the Senate as well as the legislative agenda of President Elect Joe Biden.
  • President Donald Trump's attempt to influence November results, as well as Republican plans to contest Electoral College, unsettles markets.
  • CFTC data shows $30 billion short positions against the dollar, but risk-averse traders lift it modestly higher from April 2018 lows in overnight trading.
  • U.S. equity futures suggest only modest gains to start the Tuesday session ahead of Redbook retail sales data at 8:55 am Eastern time and ISM manufacturing data at 10:00 am Eastern time.

U.S. equity futures edged lower Tuesday even as investors took a cautious stance ahead of two key Senate run-offs in Georgia later today as well as the ongoing surge in coronavirus infections that has trigged fresh lockdowns in major economies around the world.

Georgia's two Republican Senators -- David Perdue and Kelly Loeffler -- will run against Democratic challengers Jon Ossoff and Raphael Warnock in a special election that will both define the composition of the 117th Congress and the broader legislative agenda of President Elect Joe Biden. 

A swing to the Democrats could lead to deeper fiscal stimulus and a higher-tax agenda, according to some analysts, while Republican wins would balance the Senate and keep Biden from pursuing his more ambitious policies on trade, energy and security. 

With the political stakes intensifying amid President Donald Trump's seemingly brazen attempt to influence prior results in Georgia, as well as Republican lawmakers preparing to contest the outcome of the November elections tomorrow in Washington, markets have turned risk-averse over the past 48 hours, with volatility rising and stock prices falling.

Britain's decision to enter a full national lockdown amid a surge in infections -- and the identification of a new coronavirus variant -- is also weighing on sentiment as cases in the United States rise at a rate of around 200,000 per day and the death toll climbs to around 355,000.

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Still, yesterday's sell-off on Wall Street looks to steady itself in the opening hours of trading Tuesday, with contracts tied to the Dow Jones Industrial Average indicating a modest 60 point decline and those linked to the S&P 500 pricing in a 7 point dip for the broader benchmark. 

In overnight trading, risk-averse traders bid up the U.S. dollar from its two-and-a-half year lows to take the dollar index to 89.676 against its global currency peers, while the CBOE's key gauge of market volatility, the VIX, rose 18.33% to 29.92 points.

European stocks were mixed in early Tuesday trading, with Germany's DAX index shrugging-off stronger-than-expected November retail sales data to fall 0.5% while London's FTSE 100 slipped 0.05% as the pound eased to 1.3575 against the greenback.

Overnight in Asia, Japan's Nikkei 225 extended its three-day losing streak after falling 0.37% to close at 27,158.63 points while a move U-turn from the NYSE on its threat to de-list three China-based telecom companies boosted regional stocks, helping the MSCI ex-Japan index to a 0.8% gain.

Oil prices were also only modestly higher as OPEC leaders, as well as non-member allies such as Russia, continue to debate the need for changes in their agreed production cuts, which are holding back around 7.2 million barrels of oil from the market each day.

WTI futures contracts for February delivery, the U.S. benchmark, traded 89 cents higher from their Monday close in New York at $48.51 per barrel while Brent contracts for March, the global benchmark, added 96 cents to trade at $52.05 per barrel.