The Wednesday Market Minute

  • Global stocks rebound as Asia shares steady on PBOC support speculation.
  • U.S-China trade tensions keep investors on edge, however, and safe-have flows active.
  • Wall Street futures point to higher open; GE weakens on demotion from the Dow.
  • Dollar holds at 11-month highs as pound, euro weaken amid slowing growth, political tensions.
  • Oil bumps higher ahead of OPEC meeting, but no consensus yet as to how members will tweak production cut agreement.

Market Snapshot

Global stocks recovered Wednesday, with Asia shares boosted by the prospect of central bank support from China, even as investors remain cautious amid the deepening trade dispute between Washington and Beijing. 

Asia stocks rose firmly across the board, led by gains in China, as speculation of a cut in the so-called reserve requirement ratio for the country's lenders -- a move that would boost financial system liquidity -- intensified following a paper published yesterday by the People's Bank of China and comments from its Governor Yi Gang.

Broader risk sentiment was, however, blunted by both declining business confidence readings in the region and comments from White House trade adviser Peter Navarro, who told reporters Tuesday in Washington that China "miscalculated ... If they thought that they could buy us off cheap with a few extra products sold and allow them to continue to steal our intellectual property and crown jewels," adding Beijing may also have "underestimated the strong resolve of President Donald J. Trump."

The region-wide MSCI Asia ex-Japan index was marked 1.05% higher heading into the close of the session, while Japan's benchmark Nikkei 225 rebounded with a 1.25% gain to end the day at 22,555.43 points. Shares in China were also firmer on the session, with the Shanghai Composite gaining 0.44% and the CSI 300 clawing back 0.55% from yesterday's steep declines. Hong Kong's Hang Seng Index was 1.19% to the good heading into the closing bell.

Early indications from U.S. futures prices also suggest a modest rebound on Wall Street Wednesday that would snap a six-day losing streak, with contracts tied to the Dow Jones Industrial Average  pointing to a 114 point gain for the 30-stock average -- which will soon trade without one of its original members, General Electric Co. (GE) -- and an 8.2 point gain for the broader S&P 500   Futures tied to the Nasdaq Composite were trading 21 points to the upside at 6am eastern.

GE was turfed from the Dow last night by S&P Dow Jones Indices in favor of the Walgreens Boots Alliance Inc  (WBA) , capping a miserable year for the once-powerful conglomerate that has seen its share price fall more than 25% and it CEO publicly talk about breaking up the 126-year old portfolio bellwether. Shares in the group were marked 2.08% lower in pre-market trading, indicating an opening bell price of $12.68 each.

Starbucks Corp. (SBUX) shares slumped in pre-market trading Wednesday as investors reacted to plans by the world's largest coffee chain to close as many as 150 U.S. stores and cafes in its upcoming fiscal year amid intensifying competition from rivals. Starbucks shares fell more than 4% in pre-market trading Wednesday, indicating and opening bell price of $55.05 each, a move that would tip the stock into negative territory for the year. That compares to a 6.8% advance for rival Dunkin' Brands Group, Inc. (DNKN) and a 4.15% decline for McDonald's (MCD) .

TheStreet analyzes the Starbucks news below. 

European stocks also opened higher, with the Stoxx 600 rising 0.85%, led by gains for markets in Germany, where the DAX popped 0.52%, and France, where the CAC-40 edged 0.42% to the upside. Britain's FTSE 100 was the standout advancer, rising 1.2%, with support coming from both oil and basic resource stocks -- linked to the rebound in Asia -- and a weaker pound. 

Away from equities, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, held onto its recent gains to trade at a near 11-month high of 95.09 overnight, supported in part by a still-weakening euro, which continues to drift following last week's dovish interest rate signalling from European Central Bank President Mario Draghi.

Draghi, as well as his opposite number at the U.S. Federal Reserve, Jerome Powell, are slated to speak publicly today alongside a host of central bank officials at the ECB's policy forum in Sintra, Portugal. However, the one voice markets are likely most keen to hear from this week -- Mark Carney -- will not be heard as the Bank of England Governor prepares for Thursday's policy meeting that looks increasingly unlikely to alter the Bank's low-rate stance.

The pound, which was marked at 1.3164 against the dollar in early London trading, has lost more than 1.5% over the past week following a series of defeats in the Upper House of Parliament for Prime Minister Theresa May's Brexit legislation, setting up a showdown with pro-European lawmakers in her Conservative Party that could either notably soften the government's Brexit stance or, at worst, trigger fresh national elections. 

Global oil traders are also bracing for a key meeting later this week as OPEC leaders gather in Vienna to discuss potential changes to their 2016 agreement that has taken 1.8 million barrels of oil from the market each days for the past 18 months.

Crude prices were modestly stronger in early European trading, however, following yesterday's bigger-than-expected 3 million barrel fall in U.S. stockpiles -- to 430.6 million barrels -- and reports that cartel members remain divided over how best to tweak their output limit agreement in the face of plunging production numbers from Venezuela and sanction-hit Iran.

Brent future contracts for August delivery, the global benchmark, were seen 38 cents higher from their Tuesday close at $75.46 while WTI contacts for July were marked 44 cents higher at $65.34.

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