The Thursday Market Minute
- Global stocks pare gains as weakening data, dovish central bank signals highlight world economic fragility and offset a surprisingly strong US corporate earnings season.
- Dollar index trades near two-year high, German bund yields hold below zero percent, as investors drive cash into safe-haven assets.
- Facebook and Microsoft keep tech sector in focus with stronger-than-expected first quarter earnings, setting up Nasdaq Composite for another record run.
- Global oil prices gain despite broader market caution, with gains offset by record U.S. production rates and a surge in domestic stockpiles.
- U.S. equity futures suggest a 150 decline for the Dow, much of it related to an 8.65 slide for 3M after much weaker-than-expected first quarter earnings.
Global stocks pared gains Thursday, as weakening data and dovish central bank actions added to concerns over the pace of world growth and offset the bullish tenor from last night's after-the-bell earnings on Wall Street.
A surprise contraction in first quarter GDP in South Korea, followed by pledge from the Bank of Japan to keep interest rates near zero until at least next year, matched a similar dovish tilt from the Bank of Canada yesterday and weakening German business sentiment, which collectively drove investors into safer assets in overnight trading.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, traded near a two-year high of 97.18 overnight, before paring gains into the European session, while benchmark 10-year German government bond yields held in negative territory at -0.02%.
Asia's region-wide MSCI ex-Japan index was marked 0.42% lower heading into the end of the trading session while the Nikkei 225 in Tokyo rode a weaker yen, which fell to 111.83 against the greenback, to a 0.48% session gain.
Early indications from U.S. equity futures suggest a mixed start to the trading session, which will once again be dominated by blue chip earnings both before and after the closing bell, with contracts tied to the Dow Jones Industrial Average suggesting a 150 point pullback and those linked to the S&P 500 indicating a 1.25 point gain for the broader benchmark.
3M Co. (MMM) - Get Report shares were a big part of the Dow's slide, as shares fell $19 -- or 8.6% -- after it posted weaker-than-expected first quarter earnings Thursday and said it will launch a restructuring plan, including 2,000 job cuts, that will re-align the company into four business units as it slashed 2019 profit forecasts.
The Nasdaq Composite, which touched an intra-day high yesterday before paring gains into the close of trade, is set to open 67 points to the upside following better-than-expected first quarter earnings from Facebook Inc. (FB) - Get Report and Microsoft Inc. (MSFT) - Get Report .
Microsoft shares, in fact, are set to open at a record high Thursday after the iconic cloud computing group blasted Wall Street forecasts in its third quarter earnings report and predicted further growth in the months ahead.
Bristol-Myers Squibb (BMY) - Get Report shares rose 1.45 after posted stronger than-expected first quarter earnings Thursday, and boosted one of its key profit forecast, after seeing off an activist challenge to its $74 billion takeover of cancer specialist Celgene Corp. (CELG) - Get Report earlier this month.
European equity markets were similarly cautious Thursday, with investors also focused on a host of earnings from regional blue chips, including Swiss investment bank UBS AG (UBS) - Get Report and German industrial giant Bayer AG (BAYRY) .
Deutsche Bank AG (DB) - Get Report shares rose more than 4% in Frankfurt after it walked away from plans to merger with Commerzbank AG (CRZBY) Thursday as Germany's biggest lender and its main domestic rival said execution risks, capital requirements and costs related to the tie-up would outweigh its benefits.
The Stoxx Europe 600, the regional benchmark, drifted 0.2% lower by mid-day, led to the downside by trade-sensitive sectors such as autos, while Britain's FTSE 100 fell 0.48% despite the pound trading at a two-month low of 1.2871 against the dollar amid the country's ongoing Brexit uncertainty, which shows no signs of abating.
Away from equities, global oil prices resumed their march higher in overnight trading, although gains were held down by a stronger dollar and last night's output data from the Energy Department which showed domestic production rising to a record 12.2 million barrels per day and stockpiles hitting the highest level since October 2017.
Brent crude contracts for June delivery, the global benchmark for oil prices, were marked 62 cents higher from their Wednesday close in New York and changing hands at $75.19 per barrel while WTI contracts for the same month were seen 28 cents higher at $66.17 per barrel.