The Wednesday Market Minute
- Global stocks rebound as even risk fades in Europe and Asia, while U.S. stocks get a boost from extended bets on deeper Fed rate cuts.
- Reports suggest Hong Kong is ready to withdraw extradition bill to quell increasingly dangerous protests, while U.K. lawmakers move to block a 'No Deal' Brexit in defeating Prime Minister Boris Johnson.
- China' services sector grows at fastest pace in three months, suggesting government stimulus is supporting growth in the world's second largest economy
- Hurricane Dorian downgraded to Category 3 storm as it inches towards the Florida coast with wind speeds of 120 miles per hour.
- Wall Street futures suggest broad opening bell gains ahead of housing and export data at 8:30 am eastern time.
Global stocks rebounded firmly Wednesday, lifting U.S. equity futures notably higher into the start of trading on Wall Street, as investors reacted to fading event risks in Europe and Asia and re-priced markets for extended support from the world's biggest central banks.
The South China Morning Post reported Wednesday that Hong Kong executive Carrie Lam is ready to authorize the withdraw of an extradition bill in parliament that had triggered months of protests in the China-controlled territory, sending shares on the Hang Seng index sharply higher and boosting broader Asia markets, which were also supported by stronger-than-expected data from China broad services sector over the month of August.
In Europe, a defeat in parliament last night for Prime Minister Boris Johnson likely means lawmakers will vote today for another extension to the country's Brexit debate, with the Prime Minister countering with a move to call fresh elections. Both decisions essentially remove the risk of a damaging "no Deal" exit from the European Union and settled investor nerves in the region and elsewhere.
The receding risks, as well as new bets on deeper rate cuts from the Federal Reserve following yesterday's grim reading of factory activity in the United States, which showed the first contraction for the manufacturing sector in three years, is also helping Wall Street futures recover from yesterday's tumble.
Contracts tied to the Dow Jones Industrial Average indicate a 226 point gain for the 30-stock average, following yesterday's 285 point decline, while those linked to the S&P 500, which has gained 16% so far this year, are suggesting a 22 point advance for the broader benchmark.
Benchmark 10-year U.S. Treasury bond yields eased modestly to 1.493%, putting them 2 basis points over two-year yields and undoing yesterday's brief inversion of the yield curve, while bets on a 25 basis point rate cut from the Fed in its October meeting rose to just over 60%, according to the CME Group's FedWatch tool. Chances of a 25 basis point reduction on September 18 have been trading at 100% for several week.
European shares were also firmly higher in Frankfurt, with the Stoxx 600 rising 0.9% thanks to a solid 0.85% gain for the trade-sensitive DAX index. Britain's FTSE 100 was marked 0.44% higher even as the pound jumped 1.35% to 1.2140 against the U.S. dollar following Johnson's defeat in parliament late Tuesday.
Away from equities, the U.S. dollar index eased from yesterday's two-year high as rate cut bets accelerated in the wake of the ISM reading, pulling the greenback 0.15% lower against a basket of its global peers to 98.87.
Global oil prices, which slumped more than 2% yesterday amid a series of weakening manufacturing sector data from the U.S. and China as well as reports of increased production from OPEC member states, edged modestly higher Wednesday as the dollar slipped and traders swooped in to buy cheap crude.
Brent crude contracts for November delivery, the global benchmark, were seen 80 cents higher from their Tuesday close in New York and changing hands at $59.06 per barrel while WTI contracts for October, which are more tightly linked to U.S. gas prices, were marked 85 cents lower at $54.79 per barrel.