The Wednesday Market Minute

  • Global stocks drift lower as weaker manufacturing data underscores trade-related weakness in growth and investment.
  • European manufacturing suffers steepest contraction in seven years in July, pulling the euro to a two-month low ahead of tomorrow's ECB rate decision.
  • U.S. stocks poised near fresh record highs ahead of the busiest day of the second quarter earnings season to date.
  • U.S. equity futures suggest modest opening bell declines on Wall Street ahead of earnings from Caterpillar, Boeing, Facebook and Tesla as well as key PMI manufacturing data at 9:45 am Eastern time.

Market Snapshot

Global stocks drifted lower Wednesday as weakening manufacturing data from around the word underscored trade-related concerns for growth and investment and investors prepped for a busy session of corporate earnings on Wall Street as benchmarks near fresh all-time highs.

With U.S.-China trade talks stalled for most of the third quarter, and only now getting back on track with reports that Trade Representative Robert Lighthizer will visit Beijing next week, manufacturing activity in the world's largest economies has sputtered for much of the first half of the year. A European reading for July, published today by Markit Economics, showed the sharpest pace of contraction in the sector since 2012, pulling shares in the region lower and setting up a weaker opening on Wall Street.

Contracts tied to the Dow Jones Industrial Average are indicating only modest declines, however, ahead of a busy slate of earnings including industrial stalwarts Boeing (BA - Get Report) and Caterpillar (CAT - Get Report) as well as Facebook (FB - Get Report) , Tesla (TSLA - Get Report) , Ford Motor Co. (F - Get Report) and AT&T (T - Get Report) . The Dow is priced for a 105 point decline at the opening bell, while contracts linked to the S&P 500, which is withing half a percent of its all-time high, are indicating a 13 point pullback. 

Caterpillar pulled the Dow lower after it posted weaker-than-expected second quarter earnings Wednesday, and said full-year profits would come in at the lower end of guidance, as slowing global trade hit the bottom line of the world's biggest industrial equipment maker.

Snap Inc. (SNAP - Get Report) shares were another notable early market mover and indicated sharply higher after the messaging app maker posted a narrower-than-expected second quarter loss and surprised investors will solid user growth thanks to its new suite of augmented lenses and a re-tooled android platform.

Europe's overnight weakness, however, has not only pulled shares in the region lower, with the Stoxx 600 sliding 0.05% by mid-day in Frankfurt, it's also pushed investors out of the euro and the pound and into the U.S. dollar, lifting the index that tracks the greenback against a basket of its global peers 0.04% and dropping the euro to a near two-month low of 1.1134.

Britain's FTSE 100 was also active, falling 1% despite the weaker pound as investors reacted to the victory of Boris Johnson in the Conservative Party leadership race to replace outgoing Prime Minister Theresa May later today.

Johnson, a controversial former London Mayor and U.K. Foreign Minister, had pledged on several occasions during the contest to take Britain out of the European Union by the October 31 deadline with or without a trade agreement.

The dollar's modest strength failed to hold down global oil prices, however, as ongoing tensions in the Gulf region between Europe and Iran following the seizure of a British-flagged tanker last week, as well as data from the American Petroleum Institute showing U.S. crude stocks fell by a more-than-expected 11 million barrels, gave prices support in overnight trading.

Brent crude contracts for September delivery, the global benchmark, were seen 12 cents higher from their Tuesday close and changing hands at $63.95 per barrel in early trading while WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked 23 cents higher at $57.00 per barrel.