The Monday Market Minute
- Global stocks edge cautiously higher heading into this week's Fed rate meeting, with investors betting on possible support from major central banks around the world.
- Rate traders aren't expecting a Fed move this week, but July futures suggest a 66.6% chance of a cut as inflation slows and the global economy weakens.
- Global oil prices slip as the dollar gains and U.S. officials say they'll keep the Gulf region safe for vessels following a series of attacks that the Pentagon has said were directed by Iran.
- Wall Street futures suggest modest opening bell gains for the three major benchmarks ahead of NY Empire State manufacturing data at 8:30 Eastern time and the NAHB housing market index 90 minutes later.
U.S. equity futures edged higher Monday, while the dollar held at a near two-week high against it global currency peers, as investors adopted a cautious stance on risk heading into this week's Federal Reserve meeting while closely monitoring military developments in the Gulf region.
The Fed will start its two-day rate setting-meeting Tuesday in Washington against a backdrop of moderately improving consumer strength and a broader economy growing at around 2.1%. Interest rate traders aren't expecting any changes to the Fed's benchmarks, but are looking for signals from Chairman Jerome Powell as to how -- and when -- the central bank will react to low inflation and a trade-lead slowdown in the global economy.
Bets on central bank action, either from the Fed, the Bank of Japan or the European Central Bank, have underpinned stocks around the world in recent weeks, even as manufacturing data continues to suggest that the U.S.-China trade dispute is having knock-on effects around the world. The BoJ will meet later this week in Tokyo, while the ECB holds is annual retreat in the resort town of Sintra, Portugal, over the coming days.
Early indications from U.S. equity futures suggest modest gains on Wall Street to kick off the week, with contracts tied to the Dow Jones Industrial Average indicting a 56 point gain and those linked to the S&P 500, which has risen 4.9% so far this month, guiding to a 7 point gain for the broader benchmark.
Gains were tempered, however, by comments from Commerce Secretary Wilbur Ross, who told CNBC that the U.S. would make good on President Donald Trump's threat to slap fresh tariffs on $300 billion worth of Chinese imports if the two sides can't reach a trade pact.
"We will eventually make a deal, but if we don't, the president is perfectly happy with continuing the tariff movements that we've already announced, as well as imposing the new ones that he has temporarily suspended," Ross told CNBC during an interview at the Paris Air Show.
European stocks were also marginally higher at the start of trading in Frankfurt, with the Stoxx 600 benchmark adding to its June gains with a 0.13% bump, led by bank and tech stocks.
Deutsche Bank (DB - Get Report) were the session's most notable mover, surging to the top of the German market and helping financial sector shares pace gains around the region following multiple reports that the troubled lender is ready to create a €50 billion "bad bank" to house underperforming assets.
Britain's FTSE 100 edged 0.14% higher in London, while the pound slumped to a 2019 low of 1.2576 against the U.S. dollar as the leading candidates to replace outgoing Prime Minister Theresa May all appeared to push for a hard Brexit from the European Union in a televised debate lats night.
Overnight in Asia, stocks were little-changed, with a bias to the downside, as investors watched developments in Hong Kong, where protestors have been pushing back against a planned extradition bill with mainland China.
The region-wide MSCI Asia ex-Japan index was marked 0.23% lower heading into the final hours of trading while Japan's Nikkei 225 ended the session essentially unchanged from Friday to close at 21,124.00 points.
Global oil prices were also on the back foot, easing from last week's rally that saw markets rise more than 4% amid a series of attacks on shipping tankers in the Gulf of Oman and warnings from the United States that Tehran was responsible after unveiling video footage of Iranian patrol boats removing un-exploded mines from a damaged vessel.
U.S. Secretary of State Mike Pompeo told Fox News Sunday that, while the U.S. does not "want war ... the Iranians should understand very clearly that we will continue to take actions that deter Iran from engaging in this kind of behaviour".
Brent crude contracts for August delivery, the global benchmark, were seen 28 cents lower from their Friday close in New York and changing hands at $61.73 per barrel, while WTI contracts for July, which are more tightly linked to U.S. gas prices, were marked 36 cents lower at $52.15 per barrel.