The Tuesday Market Minute
- Global stocks edge lower as China data confirms troubling weakness in the world's second largest economy.
- U.S. Treasury Secretary Steven Mnuchin says "a lot of progress" made in China trade talks, but wants "a deal that's good for us" when the two sides meet next month.
- Global bond yields continue to rise, despite signals of central bank buying, as reports suggest Germany could create a so-called shadow budget to increase borrowing and investment as recession looms.
- Euro slips ahead of Thursday's ECB rate decision that is expected to unveil a major stimulus package, including the re-start of quantitative easing, in order to stoke currency area inflation.
- Global oil prices extend gains, lifting Brent crude to a six-week high, as new Saudi Energy Minister affirms commitment to OPEC production cuts.
- Wall Street futures suggest the Dow will snap its four-day winning streak with a modest opening bell decline ahead of Redbook retail sales data at 8:55 eastern time and JOLTs job openings at 10:00 am eastern time.
Global stocks drifted lower Tuesday, putting Wall Street at risk of snapping a four-day winning streak, as investors reacted to weaker-than-expected industrial data from China while continuing to factor near-term support from the world's biggest central banks.
China posted the steepest decline in factory gate inflation in at least three year last month, official data indicated Tuesday, suggesting manufacturers are having t slash prices in order to win new orders and offset the impact of tariffs on goods imported into the United States. New car sales in the world's biggest automobile market also declined, falling 9.9% from last year and notching the 14th slump in the past 15 months.
Collectively, the data suggest a weakening economy that has yet to find support from various government stimulus, including bank liquidity support and tax cuts. The figures also put added pressure on Beijing to move more quickly to solve its trade dispute with Washington, a view shared by Treasury Secretary Steve Mnuchin during an interview yesterday with Fox Business.
"We have a document, we've made a lot of progress, they're coming here, I take that as a sign of good faith that they want to continue to negotiate," Mnuchin said when asked of the state of trade talks between the U.S and China. "And we're prepared to negotiate. If we can get a good deal, a deal that's good for us, we'll sign it."
The overnight weakness in Asia markets, as well as an absence of major corporate earnings this week, left Wall Street futures with little support in early pre-market trading, with contracts tied to the Dow Jones Industrial Average suggest on modest changes from last night's closing level of 26,835.51 points.
Contracts liked to the S&P 500, which has gained 1.8% so far this month and 18.8% for the year, were marked for a 2.5 point opening bell decline while those linked to the tech-focused Nasdaq Composite were indicating a 14 point pullback.
European markets were also under pressure buy mid-day in Frankfurt, with the Stoxx 600 Europe falling 0.50% and Britain's FTSE 100 sliding 0.20% as the pound held at 1.2338 and basic resource stock lagged following the weaker-than-expected China data.
Overnight in Asia, the weakening China data pushed the Shanghai Composite into a 0.25% decline heading into the close of trading, while a notably softer yen, which touched a five-week low against the U.S. dollar, allowed the Nikkei 225 to book a 0.35% session gain.
Global bond markets were also active again Tuesday, with yields rising in major economies around the world amid reports that Germany could be preparing ways to allow for deeper borrowing and spending plans in order to ensure that Europe's largest economy avoids slipping into a prolonged recession.
The so-called 'shadow budget' plans, which could skirt rules that cap Berlin's borrowing, lifted benchmark 10-year German bund yields to a one-month high of -0.565% and helped push similarly-date U.S. 10-year Treasury note yields -- which have risen 20 basis points since September 3 -- to a multi-week high of 1.64%.
Oil markets have also been rising steadily for much of September, even as demand concerns continue to linger amid a slowing global economy, and extended gains again Tuesday after Saudi Arabia's new Energy Minister, Price Abdulaziz, said the Kingdom would continue to support OPEC production cuts and deepen ties with non-member states in order to better-control global prices.
Brent crude contracts for November delivery, the global benchmark, were seen 36 cents higher from their Monday close in New York and changing hands at a six-week high of $62.95 per barrel in early European trading while WTI contracts for October were marked 25 cents higher at $58.20 per barrel.