The Thursday Market Minute

  • Global stocks mixed as trade war rhetoric eases, but risk aversion dominates trading.
  • Oil slumps lower as OPEC preps for Friday decision on output in Vienna.
  • Wall Street futures point to modestly higher open; Nasdaq may test new record highs.
  • Dollar holds at 11-month highs; pound weakens ahead of Bank of England rate decision in London.
  • Daimler warns on profits, cites trade tensions, sending German automakers lower.

Market Snapshot

Global stock markets traded cautiously Thursday, with a mixed session in Asia followed by a modestly positive open in Europe, as investors continue to eye developments in the U.S.-China trade war and await a decision from the world's biggest oil producers as to whether they will increase output. 

Risk aversion remained for most markets, however, as China warned the U.S. that it's ready to respond to recently-announced tariffs with "qualitative and quantitative" measures of its own and European Union officials brought forward the date at which its own levies on U.S. made goods will kick-in.

"It is deeply regrettable that the U.S. has been capricious, escalated the tensions, and provoked a trade war," said Commerce Ministry spokesman Gao Feng . "The U.S. is accustomed to holding 'big sticks' for negotiations, but this approach does not apply to China."

China's state-run newspaper, the Global Times, also noted in an editorial Thursday that "if Trump continues to escalate trade tensions with China, we cannot rule out the possibility that China will strike back by adopting a hard-line approach targeting Dow Jones index giants."

Investors were also unsettled by a surprise profit warning from Daimler AG (DMLRY) , the world's biggest luxury carmaker, which cited trade tensions as a major factor in its softer 2018 outlook published late last night.

With the U.S. dollar rising to a near one-year high against a basket of its global peers as investors piled-in to safe-haven assets, equity market reaction in Asia was relatively predictable: emerging market stocks weakened while Japan's Nikkei 225 notched a 0.61% gain thanks to a softer yen. The region-wide MSCI Asia ex-Japan index, meanwhile, was marked 0.37% lower heading into the close of the session.

$DXY going for the break... all about follow-through and day/week close... pic.twitter.com/H9ZJx8qzft

— 50 Pips (@50Pips) June 21, 2018

Early indications from U.S. equity futures suggest a weaker start to the session on Wall Street, with contracts tied to the Dow Jones Industrial Average  pointing to an 88-point decline for the 30-stock benchmark while those linked to the S&P 500  indicating a 2.4 point slip for the broader benchmark. Futures tied to the Nasdaq Composite were trading 6.8 points to the downside at 6:30 am eastern. 

European markets traded lower in the opening hours in Frankfurt, with the Stoxx 600 edging 0.28% lower by mid-day, as gains for basic resource stocks offset a weak auto sector, which was led by a 4.4% decline for Daimler and a 2.6% slide for domestic rival BMW AG  (BMWYY) . Germany's DAX performance index was the standout underperformer as a result, with the benchmark falling 0.94% by mid-day. 

European Car makers today pic.twitter.com/IYyoHpPcSO

— Michael Hewson ���� (@mhewson_CMC) June 21, 2018

Britain's FTSE 100 rose 0.07% with stocks getting a boost from a weaker pound, which traded at 1.3147 against the U.S. dollar ahead of today's Bank of England rate decision later today in London. 

Governor Mark Carney and his colleagues are unlikely to agree a hike in interest rates, however, and investors are betting the Bank will use the next six weeks to monitor developments in the U.K. economy, where growth eased to the slowest pace in five years last quarter, before reaching a decision for their August gather.

Carney, however, may articulate details of this strategy later tonight during his annual address to business and financial markets leaders during the so-called Mansion House speech in central London. 

Global oil prices extended declines Thursday amid reports that OPEC members are close to agreeing a deal that would increase output at their semi-annual meeting in Vienna this week.

Saudi Arabia's powerful Energy Minister, Khalid Al-Falih, said that global consumers were demanding more crude supply and that he was confident a deal could be struck that would satisfy all stakeholders at tomorrow's meeting of the Organization of the Petroleum Exporting Countries and said global markets were "re-balanced" even as he conceded that the cartel's mission wasn't yet accomplished.

Brent crude contracts for August delivery, the global benchmark for prices, were marked $1.25 lower from their Wednesday close in New York and changing hands at $73.49 each in early European dealing. WTI contracts for July delivery, which are more tightly-linked to U.S. gas prices, were marked 96 cents lower at $64.75 per barrel.

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