The Friday Market Minute

  • Global stocks drift lower, setting up Wall Street for a weaker opening bell, as Beijing ramps up rhetoric in the U.S.-China trade war.
  • State-run media use print, television and social media to excoriate U.S. moves on trade, as well as its blacklisting of Huawei, suggesting the two sides are moving further away from a potential deal.
  • Bank of Japan Governor vows to keep rates near zero until the Spring of next year, underscoring the trade war threat to growth and its impact on currency markets and the U.S. dollar.
  • China's yuan slumps to November 2018 low of 6.9138 against the U.S. dollar, nearing the critical level of 7.00 and spooking investors in regional FX markets.
  • Global oil prices steady despite rising military and political tensions in the Gulf region, with markets soothed by dovish comments from President Donald Trump.
  • Wall Street futures suggest a weaker start to the trading day, following last night's rally that lifted benchmarks into positive territory for the week, ahead of earnings from Deere & Co. and consumer sentiment data at 10:00 am Eastern time.

Market Snapshot

Global stocks were in retreat Friday, setting up Wall Street for big opening bell declines, as investors grow increasingly concerned that while this week's trade war acceleration has put a potential deal between the U.S. and China further into the future, its impact on the world economy is far more immediate.

Contacts tied to the Dow Jones Industrial Average are suggesting a 202 point pullback and those linked to the S&P 500 indicating a 21.9 point decline for the broader benchmark. Nasdaq Composite futures are guiding to a 71.1 point slide.

Bank of Japan Governor Haruhiko Kuroda pledged Friday to keep interest rates near zero until at least the middle of next year, noting a weakening global economic outlook could make Japanese manufacturers more cautious about spending.

His remarks echo deepening concerns for the fate of the global economy amid the escalating trade tensions between the U.S. and China, which was capped by a decision from President Donald Trump to place Huawei Technologies on a blacklist that prevents it from dealing with U.S. companies without prior approval.

China's state-run media mounted an all-out assault on that decision Friday, using print, television and social media platforms to excoriate the U.S. move to censure Huawei and pressure the government to adapt its laws to facilitate freer trade, with a front-page splash in the People's Daily Newspaper invoking military and nationalist themes as it descried China's position as "as firm as a boulder."

China's yuan, however, was anything but this week, falling to a November low of 6.9138 as the U.S. dollar gained traction against a basket of its global peers, taking the dollar index to a two-week high as central banks around the world -- including Japan -- hinted at dovish moves to support slowing trade-related growth. 

China's move towards populist rhetoric, however, and its comfort with a weakening yuan could mark a new phase in the trade war, and were enough to pull the region-wide MSCI Asia ex-Japan index 0.7% lower in the overnight session, although a weaker yen helped the Nikkei 225 to a 0.9% session gain.

"(The dollar/yuan pair) has traded as high as 6.9450 today and were it to hit 7.00, alarm bells would ring even louder around the world," said ING's global head of strategy Chris Turner. "It would be a surprise if equity markets were to hold onto this week's recovery and the safe havens of the US dollar, Japanese yen and Swiss franc will continue to outperform."

Nvidia Inc. (NVDA - Get Report) shares were a notable early market mover, rising 1.75% in pre-market trading, after the chipmaker topped analysts' forecasts with solid first quarter earnings, although gains were tempered by questions over its predictions for a second-half sector rebound as it backed away from full-year revenue guidance.

Luckin Coffee Inc. (LK)  was also in focus after it priced its planned IPO at the higher end of its target range, the company said Friday. setting up a debut on the Nasdaq that will value the China-based rival to Starbucks (SBUX - Get Report) at more than $4.2 billion.

Deere & Co. (DE - Get Report)  shares fell 4.4% in pre-market trading after it posted weaker-than-expected second quarter earnings Friday, and lowered its full-year profit outlook, as "softening" agricultural market conditions, and reduced export market access, clouded its near-term forecasts.

European stocks were weaker at the start of trading in Frankfurt and London, as well, with the region-wide Stoxx 600 index slumping 0.66% by mid-day, with autos and financials leading the decline, while Britain's FTSE 100 fell 0.31% even as the pound drifted to a five-month low of 1.2750 against the U.S. dollar.

Global oil prices also edged higher in the European session amid concerns over rising tensions in the Gulf region, where Saudi Arabia carried out reprisal attacks on Houthi rebels in Yemen after the Iran-linked group claimed responsibility for a series of assaults on Saudi tankers in the Strait of Hormuz earlier this week.

Brent crude contracts for July delivery, the global benchmark for oil prices, were marked 48 cents higher from their Thursday close in New York and changing hands at $73.10 per barrel while WTI contracts for June delivery were seen 58 cents lower at $63.45 per barrel.