The Thursday Market Minute

  • Global stocks edge higher after yesterday's wipe-out, but bond yields hold near multi-year lows as investors favor caution over risk.
  • China renews its media blitz on trade, insisting government has 'tool box' to cope with prolonged trade war.
  • U.S. dollar trades near two-year high against a basket of its global peers, pushing the pound and the euro to multi-month lows and enticing bargain hunters to European stocks.
  • Oil prices edge higher after a bigger-than-expected build in U.S. crude inventories last week, according to API data, with official figures from the EIA due at 10:00 am Eastern time.
  • Wall Street futures suggest modest opening bell gains for Wall Street, following yesterday's slump to a two-month low, ahead of earnings from Costco, Dollar General, Gap and Dollar Tree.

Market Snapshot

Global stocks edged cautiously higher Thursday, while Wall Street futures attempted to bounce from multi-month lows, but suggestions that China is ready to dig in for a protracted trade dispute with the United States has investors favoring safe-haven assets heading into the final trading days of the month.

U.S. stocks have retreated more than 5.5% so far this month, with tech bellwethers such as Apple (AAPL - Get Report) and Tesla (TSLA - Get Report) slumping 16% and 20% respectively as investors worry that Beijing's threat of tariff and trade reprisals could upend China-focused revenues and disrupt sector supply chains.

The China Daily newspaper added to those concerns Thursday, adding its voice to a state-lead media effort to bolster the nation's position in what now looks to be a prolonged trade war between the world's two biggest economies.

"It would be naive to think that China does not have other countermeasures apart from rare earths to hand," the paper said, referring to yesterday's threat from the People's Daily newspaper that the government could ban the export of the crucial metals and alloys. "As Chinese officials have reiterated, they have a 'tool box' large enough to fix any problem that may arise as trade tensions escalate, and they are ready to fight back 'at any cost'." 

Asia stocks, however, managed to eek out modest gains beyond the China borders, with the MSCI ex-Japan benchmark rising 0.21%, while China's Shanghai Composite fell 0.3% and the Heng Seng slipped 0.35%.

Early indications from U.S. equity futures suggest modest gains on Wall Street, following last night's slump which took the three major benchmarks to two-month lows, with contracts tied to the Dow Jones Industrial Average indicating a 50 point advance and those linked to the S&P 500 guiding for a 5.7 point bump for the broader benchmark.

Ray Dalio, the billionaire investor and co-chairman of Bridgewater Associates, called the trade standoff an "ideological conflict" that's created a "risky time" for the global economy.

As I've explained, the U.S.-China conflict is more than a "trade war." It's an ideological conflict of comparable powers in a small world. What's most important at this time of brinksmanship is seeing what actually happens next. https://t.co/ILbdulCYUX

— Ray Dalio (@RayDalio) May 29, 2019

That view continues to be expressed in global fixed income markets, where benchmark 10-year yields at locked near multi-year lows as investors plow cash into safe-haven assets in the face of increasing signals of slowing growth and little or no inflation in the world's major economies.

U.S. 10-year Treasury notes eased in overnight trading, but at 2.264% are still within touching distance of their September 2017 lows. Benchmark German bunds, meanwhile, were marked at -0.153%, less than 5 basis points from the all-time low they hit in 2016.

Bullish pajama traders hanging on slim reed: blah European rally, oil slightly up and four clicks up in rates.. Not enough... We are somewhat oversold though...Not enough

— Jim Cramer (@jimcramer) May 30, 2019

European stocks, however, managed to climb into positive territory heading into the final trading days of a month which has seen the Stoxx 600 benchmark fall 5.3% amid a risk-off mix of global trade disputes, Brexit uncertainty and EU Parliamentary elections.

The Stoxx 600 crept 0.3% higher in the opening minutes of trading in Frankfurt, while Britain's FTSE 100 added 0.19% as the pound retreated back towards a five month low at 1.2630.

Global oil markets were also entice bargain hunters this morning, after prices fell to early March lows yesterday, following a bigger-than-expected 5.9 million barrel decline in U.S. crude stocks reported by the American Petroleum Institute.

Brent crude contracts for July delivery were marked 28 cents higher from from their Wednesday close and changing hands at $69.73 per barrel while WTI contracts for the same month were seen 63 cents higher at $59.44 per barrel.