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The Monday Market Minute

  • Global stocks retreat as political risks pile onto economic concerns, sending investors into safe-have assets around the world.
  • House Speaker Nancy Pelosi's move to open a formal impeachment inquiry into President Donald Trump rattles markets.
  • U.K. Supreme Court ruling on Prime Minister Boris Johnson's Parliamentary prorogue further complicates Britain's Brexit chaos.
  • Oil prices slide following Trump's comments on China trade, Iran leadership, offsetting concerns over Saudi Arabia's return to full production following last week's attack in Abqaiq and Khurais.
  • Wall Street futures suggest modest opening bell declines for the Dow, while Treasury bond yields and the dollar continue to rally.

Market Snapshot

Global stocks slumped Wednesday, although U.S. equity futures suggest modestly opening bell gains, as investors grappled with rising political risks that on both sides of the Atlantic that have added to concerns about the fate of the world economy.

Democratic House Speaker Nancy Pelosi said Tuesday that Congress would open a formal impeachment inquiry in President Donald Trump, calling allegations that he attempted to pressure Ukraine's President, Volodymyr Zelensky, into helping smear Democratic Presidential hopeful Joe Biden.

Pelosi called the allegations a "betrayal of his oath of office, betrayal of our national security and betrayal of the integrity of our elections", while Trump dismissed the move as a "garbage" and a partisan "witch hunt".

There has been no President in the history of our Country who has been treated so badly as I have. The Democrats are frozen with hatred and fear. They get nothing done. This should never be allowed to happen to another President. Witch Hunt!

— Donald J. Trump (@realDonaldTrump) September 25, 2019

The prospect of impeachment hearings, however, added to the political uncertainty heading into next year's election cycle, which will be set against a slowing global economy and increasing U.S.-China trade tension.

Trump added to both concerns yesterday in both his reaction to calls to release the full report of a whistleblower's complaint against him in the Zelensky allegations and comments at the U.N. General Assembly on China, whom he accused of failing to adopt promised reforms linked to its admission in the World Trade Organisation in 2001.

"China has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale," Trump said in remarks that suggest trade negotiations, which began last week after a two month hiatus, are not progressing quickly towards a deal.

U.S. equity futures, however, appeared to steady overnight, following last night's sell-off on Wall Street, with contracts tied to the Dow Jones Industrial Average indicating a modest 36 point gain and those linked to the broader S&P 500 guiding to a 3.1 point bump despite the heavy selling in markets around the world.

European shares were notably weaker by early afternoon trading in London and Frankfurt, with investors adding Trump's potential impeachment to a list of woes including an impending recession in Germany, a prolonged U.S.-China trade war and the chaos surrounding Britain's impending exit from the European Union.

Germany's trade-sensitive DAX index was marked 1% lower by mid-day, a move that helped pull the broader Stoxx 600 into a 1.1% session decline. Britain's FTSE 100, meanwhile, sank 0.44% as investors dumped U.K. risk following yesterday's decision by the Supreme Court that invalidated Prime Minister Boris Johnson's decision to prorogue Parliament.

The plethora of political and economic risks has added upward pressure to safe-have assets, with the U.S. dollar index rising 0.3% to 98.71 against a basket of global currencies and benchmark 10-year U.S. Treasury bond yields falling to 1.64% in overnight dealing.

Overnight in Asia, the safe-haven yen rose to 107.36 against the greenback as traders offered the first early reaction to Pelosi's impeachment statement, a move that pulled the Nikkei 225 into a 0.36% session decline. 

Stocks in the region were also weaker by the close of trading, with the MSCI ex-Japan benchmark falling 0.95% in notable "risk-off" trading.

Global oil prices were also weaker in the overnight session, with traders offsetting concerns for a quick return to full capacity in Saudi Arabia following last week's drone attacks with Trump's comments on trade and his hawkish tone on Iran during his speech to the U.N. General Assembly.

Brent crude contracts for November delivery were seen $1.04 lower from their Tuesday close in New York at $62.06 per barrel while WTI contracts for the same month were marked 89 cents lower at $56.40 per barrel.