Stocks trying to steady.

The Tuesday Market Minute

  • Global stocks steady as China markets stage late-session rebound amid speculation of PBOC intervention.
  • China's yuan slides to near one-year low against the U.S. dollar as trade war impact hits growth sentiment.
  • Euro recovers as German leaders reach deal on immigration that likely eases pressure on Chancellor Angela Merkel.
  • Oil prices jump as Libya declares Force majeure on some crude deliveries.
  • Wall Street futures point to triple-digit opening bell gains for the Dow but bond yields continue to test equity market optimism.

Market Snapshot

Global stocks steadied Tuesday, helping pull Wall Street futures into positive territory, after a late-session rally in China lifted stocks in the region from a nine-month low amid speculation that the country's central bank had entered the foreign exchange market in order to support the slumping yuan as investors fear a prolong trade war with the United States will hamper growth in the world's second-largest economy.

The PBOC would only say that it supports a managed floating exchange rate system, adding that it will continue "prudent and neutral" monetary policies in order to keep the yuan stable. However, with the currency falling below the 6.7 mark against the U.S. dollar for the first time since early August, investors are suggesting the looming impact of tariffs on $34 billion in China-made goods, which come into effect on Friday, as well as threats by President Donald Trump to slap levies on billions more, has both reduced investor appetite for Asia stocks and blunted investor sentiment in other markets around the world.

Unlike 2015, this latest round of RMB weakness is not being driven by a collapsing Chinese economy and indiscriminate outflows (though this could eventually be the case depending on how the trade war develops - but it's not yet)!

— Stephen W Gallo (@SGalloFX) July 3, 2018

The region-wide MSCI Asia ex-Japan index, the broadest measure of share prices, was marked 0.24% to the downside heading into the close of the session, having pared a near 1% decline from earlier in the session. The late-session rally, spurred by speculation of PBOC action on the yuan, lifted the Shanghai Composite index +0.4% into positive territory and trimmed loses for the Nikkei 224 in Japan to just 0.12% by the close of trading in Tokyo.

European stocks were also given a boost from the tailwind out of Asia, although gains were limited by a stronger euro, which popped to 1.1656 against the greenback after a deal between Germany's Angela Merkel and her government partners of the Christian Socialists Party on immigration looks to have eased pressure on the Chancellor and prevented the risk of fresh national elections in the region's biggest economy.

The Stoxx Europe 600 index, the regional benchmark, was seen 0.72% higher in the opening two hours of trading, led by a 1.05% gain for the DAX performance index in Germany and a 0.9% advance for the CAC-40 in Paris. Britain's FTSE 100 was marked 0.32% higher at 7,571.97 points at 10:00 London time, with gains held down by a stronger pound, which rose to 1.3164 against the dollar following stronger-than-expected construction PMI data for the month of June.

Glencore Plc (GLNCY) shares plunged Tuesday after the world's biggest commodities trader said it had received a subpoena from the U.S. Department of Justice seeking documents related to the Foreign Corrupt Practices Act and money laundering statutes.

Glencore shares fell more than 12.5% in London trading immediately following news of the subpoena receipt, the steepest one-day decline in three years, to change hands at 305.5 pence each, the lowest level since July 11.

Early indications from U.S. equity futures suggest a similarly solid open on Wall Street, with contracts tied to the Dow Jones Industrial Average pointing to a 112 point advance and those linked to the S&P 500 suggesting a 9-point gain for the broader benchmark. Nasdaq Composite futures were pointing to a 34 point bump for the tech-focused index.

The economy is doing perhaps better than ever before, and that's prior to fixing some of the worst and most unfair Trade Deals ever made by any country. In any event, they are coming along very well. Most countries agree that they must be changed, but nobody ever asked!

— Donald J. Trump (@realDonaldTrump) July 3, 2018

Facebook Inc. (FB) shares slipped lower in pre-market trading Tuesday after a report that suggested a probe into data breaches at the social media giant had been expanded to include the Securities and Exchange Commission.

The Washington Post reported late Monday that the SEC, as well as the Federal Bureau of Investigation and the Federal Trade Commission, have joined the U.S. Justice Department in the ongoing investigation of the mis-use of Facebook user data by the now bankrupt British political consultancy Cambridge Analytica. Citing sources close to the investigation, the Post said the probe is focused on Facebook's public disclosures -- including the Capitol Hill testimony of CEO Mark Zuckerberg -- and whether those statements were timely and accurate.

Action Alerts Plus holding Facebook shares were marked 1.44% lower in pre-market trading in New York Tuesday, indicating an opening bell price of $194.52, a move that would trim the stock's three-month gain to around 22%.

Away from equities, however, investor caution appears more evident, with yields on U.S. Treasury bonds still indicating concern of a slowing growth in the world's biggest economy even as data continues to support expectations of a solid print for second quarter GDP. Benchmark 10-year Treasury note yields were seen at 2.871% in early European trading while 2-year notes were marked at 2.545%, putting the gap between short and mid-term yields at just 32.6 basis points, near the lowest since 2007. 

"Turbulent first half of 2018 for stocks" - You Ain't Seen Nothing Yet

The UST yield curve flattening suggests that VIX will be moving even higher in the next few years. @allstarcharts @piptrain @TimDuy @bullandbaird @sspencer_smb

— Johnny Bo Jakobsen (@jbjakobsen) July 3, 2018

Global oil markets, however, continue to trade with the assumption of stronger growth, as investors push crude higher despite near-record output from the United States and an agreement by OPEC producers to pump more crude into the market in order to stablize prices. Further upside pressure came from a declaration of Force majeure on some oil exports in Libya, a move that could impact as many as 850,000 barrels a day, owing to the ongoing military conflict between government forces and rebels led by Khalifa Haftar.

Brent crude contracts for September delivery, the global benchmark, were seen 36 cents higher from their Monday close in New York and changing hands at $77.66 per barrel in early European trading. WTI contracts for August, which are more tightly linked to U.S. gas prices, were marked 64 cents higher at $74.58 per barrel.