The Wednesday Market Minute

  • North Korea's threat to scrap its June summit with Trump rattles Asia markets.
  • Benchmark 10-year Treasury yields holding at 2011 high of 3.07%.
  • U.S. dollar index trading at fresh 2018 highs.
  • Italian government bond yields pass 2% amid concern over aims of new government.
  • Macy's earnings, housing starts, EIA crude data top light Wednesday event calendar.
  • TheStreet's latest feature looks at the changing landscape of the grocery store industry.

Market Snapshot

Global stocks fell for the second consecutive session Wednesday as investors reacted to news that North Korea may cancel a planned summit with the the United States and government bond yields traded at multi-year highs amid renewed bets of faster inflation and quicker rate hikes from the Federal Reserve.

North Korea's threat to pull out of the June 12 meeting with President Donald Trump in Singapore, however, appeared to be the linchpin for investors to pull back from global stock markets in order to reassess the range of geopolitical risks around the world.

"If the U.S. is trying to drive us into a corner to force our unilateral nuclear abandonment, we will no longer be interested in such dialogue and cannot but reconsider our proceeding to the DPRK-U.S. summit," North Korea said in a statement through its state broadcaster.

That, along with solid retail sales and factory data from the United States Tuesday, boosted the dollar to the highest levels since late December and took benchmark 10-year U.S. Treasury bonds yields to a July 2011 high of 3.065% in overnight Asia trading.  Sentiment was also hit by data showing Japan, the world's third-largest economy, shrank by 0.6% in the first three months of the year, snapping its longest streak of consecutive quarterly growth since the late 1980s.

Regional stocks were softer, with the Nikkei 225 falling 0.44% to close at 22,7171.23 points and the broader MSCI Asia ex-Japan index trading essentially unchanged from their Tuesday closing levels.

Against that cautious backdrop, U.S. equity futures are pointing to modest gains on Wall Street, with contracts tied to the Dow Jones Industrial Average  suggesting a 41 point opening bell slip, tacking on to yesterday's 193 point slide, while the S&P 500  is set to fall by around 3 points. 

Macy's Inc. (M) shares surged more than 12% in pre-market trading, taking rival retailers JC Penney (JCP) , Kohl's Corp. (KSS) and Nordstrom Inc. (JWN) notable higher after the iconic retailer topped Street estimates for its first quarter earnings, which included a bottom line of 48 cents a share and sales of $5.54 billion. The group also boosted its full-year outlook.

The CME Group's FedWatch tool suggests a 43% probability that the Fed Funds rate will hit 2.5% this year, that's down from 43.8% on Monday but up more than 200 basis points from a week ago and 700 basis points from the middle of April. 

That consensus, which was supported by solid retail sales data for the month of April yesterday, helped boost the U.S. dollar index, which benchmarks the greenback against a basket of six global currencies, to 93.25, the highest level since late December. 

The dollar's gains pushed the euro to a fresh five-month low of 1.1783 in London trading and let the pound dip below the 1.35 mark for the first time this year.

The regional currency weakness supported otherwise uninspired European markets Wednesday, with the Stoxx 600 benchmark rising 0.01% in the opening minutes of trading in Frankfurt and Britain's FTSE 100 adding 0.04% to trade a few points over the 7,700 mark.

Italian shares, however, were the region's outlier, with the benchmark FTSE MIB index falling nearly 1% following the leak of a paper late Tuesday which outlined some of the early objectives of two parties -- Five Star and League -- attempting to form a government from the March elections.

Benchmark 10-year Italian government bonds, known as BTPs, trading past 2.06% in European trading for the first time in two months after the paper suggested the pair would seek an exit from the single currency, slash corporate and individual taxes, scrap pension reform and introduce a universal basic income, all of which would not only swell the country's budget deficit, but also add to its staggering €2.1 trillion debt pile.

Global oil prices traded lower in early European dealing, largely tracking the gains for the U.S. dollar but also reacting to a trimming of global demand forecasts from the International Energy Agency, with Brent futures contracts for July delivery falling 45 cents a barrel to $77.98 while WTI contracts for June delivery falling 30 cents to $71.01 per barrel.

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