The Friday Market Minute
- Global stocks retreat, bonds rally, as weak China data has investors fleeing to safe-haven assets.
- China' industrial output slumps to a seventeen year low, triggering fresh concern for the impact of its trade dispute with the United States.
- Broadcom offers grim assessment for the chip sector after mixed quarterly earnings, putting tech under pressure heading into opening bell.
- Global oil markets remain nervous over developments in the Gulf region, where U.S. officials have blamed this week's attacks on tankers in the Strait of Hormuz on the Iranian government.
- Wall Street futures weaken into the opening bell, with investors looking to May retail sales data at 8:30 am Eastern time for more clues as to how the Fed could react on rates next week in Washington.
Global stocks retreated Friday, pulling Wall Street futures into the red and setting off a rally in government bonds, as investors reacted to weaker-than-expected factory data in China, escalating tensions in the Gulf region and a dismal sector outlook from one of he world's biggest chipmakers.
China's May industrial output reading slumped to a seventeen year low of +5%, official figures published Friday indicated, while fixed asset investment slowed and retail sales rebounded to an 8.6% growth rate. The data suggests a deeper-than-expected impact from China's ongoing trade dispute with the United States, but also indicates a likely parallel slowdown in many of the world's major economies.
Against that somber assessment of industrial activity, Broadcom (AVGO) - Get Report CEO Hock Tan said "the U.S.-China trade conflict including the Huawei export ban is creating economic and political uncertainty and reducing visibility" as the chipmaker reported a 10% slump in sales from its biggest business unit and narrow topline miss from its second quarter earnings report. Broadcom shares were marked 9.24% lower in pre-market trading at $255.60 per share.
U.S. equity futures are largely still digesting the negative overnight newsflow, which includes an escalating standoff between Washington and Tehran in the Gulf region following a number of attacks on tankers in the world's busiest commodity shipping lane.
Contracts tied to the Dow Jones Industrial Average suggest a 66 point pullback at the opening bell, while those linked to the S&P 500 suggest an 8.5 point slide for the broader benchmark.
Overnight market reaction in Europe and Asia, however, suggests the losses may deepen as the session carries on, although much will depend on the reading of May retail sales data at 8:30 am and its implications for potential rate cuts from the U.S. Federal Reserve.
Benchmark 10-year government bond yields certainly suggest a defensive tenor ahead of the data, with yields falling to a multi-year low of 2.06% while 10-year German bund yields were marked at a fresh record low of -0.27%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was modestly higher at 97.084.
Europe's Stoxx 600 benchmark fell 0.71% by mid-day of trading in Frankfurt while the trade-sensitive DAX performance index lead regional decliners with a 0.87% slump. Britain's FTSE 100 was also on the back foot, falling 0.63% by late morning in London even as the pound retreated to 1.2643 against the U.S. dollar.
Global oil prices were holding on to last night's gains in early New York trading Friday, with downward pressure from a modestly stronger U.S. dollar and a cut in global demand forecasts from the International Energy Agency.
However, with U.S. officials releasing video what they have said is proof of Iran's involvement in this week's attacks on two shipping tankers in the Gulf of Oman, prices are likely to remain volatile throughout the session.
Brent crude contracts for August delivery, the global benchmark, were seen 8 cents lower from their Thursday close in New York and changing hands at $61.25 per barrel, while WTI contracts for July, which are more tightly linked to U.S. gas prices, were marked 18 cents lower at $52.10 per barrel.
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