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The Monday Market Minute

  • Global stocks turn red as concerns over the strength of the world economy keep investors cautious ahead of two key policy events later this week.
  • The U.S. dollar index trades near 18-month high as the Federal Reserve preps for its two-day rate setting meeting that begins Tuesday.
  • China's Xi Jinping will speak Tuesday on the 40th anniversary of the nation's economic reforms amid concerns that the ongoing trade war will clip 2019 growth.
  • European stocks drift red, with retail shares trading at the bottom of markets around the region, as political and growth concerns keep consumers on edge.
  • U.S. stocks set to open weaker, with Dow futures indicating a 35 point opening bell decline amid the worst December performance in sixteen years.

Market Snapshot

Global stocks extended declines Monday , pushing U.S. equity futures heading into red at the start of what is likely the final full trading week of the year, as investors remain cautious over the health of the world economy and remain focused on two key policy events in the coming days.

With U.S. stocks looking at their weakest December performance in sixteen years, the Federal Reserve's Wednesday rate decision will be paramount in defining both the final trading days of the year and the broader market tone heading into 2019 as investors look for clues as to whether the central bank will not only raise rates for the fourth time this year but also how it signals on near-term tightening.

The CME Group's FedWatch tool suggests a 76% chance the bank will lift its benchmark rate to a range of 2.25% to 2.5% when its two-day meeting wrap up Wednesday, but is only assigning a 26% chance of a follow-up hike in March as investors suspect chairman Jerome Powell will hold-fire as data from around the world suggests growth in major economies is slowing quickly into 2019 on the heels of an ongoing U.S. China trade war.

It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!

— Donald J. Trump (@realDonaldTrump) December 17, 2018

Early indications from U.S. equity futures reflected that caution, with contracts tied to the Dow Jones Industrial Average suggesting a 160 point opening bell decline while those linked to the S&P 500 are indicting a 12.4 point dip for the broader benchmark after closing at the lowest level since April on Friday.

Goldman Sachs (GS) shares were an early mover of note and set to open at a fresh two-year low Monday after officials in Malaysia filed criminal charges against the bank and two of its former employees as part of an investigation into a multi billion dollar corruption scandal linked to a sovereign wealth fund.

Goldman Sachs shares were marked 1.6% lower in pre-market trading Monday, indicating an opening bell price of $169.9 each, the lowest since October 2016 and a move that would extend its three-month decline to around 27% as the bank continues to suffer from a lack of investor confidence heading into the final days of the tenure of outgoing chairman Lloyd Blankfien.

Johnson & Johnson (JNJ) shares extended declines following last week's move that loped $40 billion in market value from the iconic consumer brands group following a report that said the company knew for decades that its iconic baby powder sometimes contained asbestos and failed to alert authorities.

Johnson & Johnson shares were marked 0.83% lower in pre-market trading Monday, indicating an opening bell price of $131.90 each following Friday's 10% decline, the biggest in 15 years. The combined moves would take the stock to the lowest level since late July.

Slowing China growth, which was in evidence last week amid the weakest domestic retail sales growth in more than five years in November, will likely form the focal point of President Xi Jinping's speech on the 40th anniversary of China's economic reforms Tuesday, which will be followed-up by a meeting of the government's central-planning working conference later this week.

Stocks in Asia, however, were only marginally higher across the Monday session, although markets did find support from a stronger U.S. dollar, which makes exports more attractive, and softer global oil prices, which eases consumer spending burdens. 

The region-wide MSCI Asia ex-Japan index was marked 0.28% higher heading into the final hours of trading Monday while Japan's Nikkei 225 closed 0.64% to the upside at 21,508.68 points.

European stocks, however, failed to ride that updraft at the start of trading for the week, with benchmarks around the region slipping into negative territory amid concerns over both political risks in some of it major economies, including the United Kingdom, and the strength of consumer spending, which looks to have weakened notably into the final weeks of the year.

The Stoxx Europe 600, the broadest measure of regional share prices, slipped 0.5% by mid-day in Frankfurt while Britain's FTSE 100 fell 0.35%, as retail-focused stocks slumped following a profit warning from online clothing group ASOS plc  (ASOMY) .

Away from equities, the U.S. dollar index, which tracks the greenback against a baskets of six global currencies, traded within touching distance of an 18-month high at 97.38 heading into the start of the December Fed meeting Tuesday, before paring that advance to 97.20 while benchmark 10-year government bond yields were pegged at 2.893%.

Global oil prices, meanwhile, were supported by the softening dollar and signals of slowing production in the United States, where oil services group Baker Hughes said its key rig count slipped by 4 installations to 873 in total last week, the lowest since mid-October.

Brent crude contracts for February delivery, the global benchmark, were marked 59 cents higher from their Friday close in New York and changing hands at $60.87 per barrel while WTI contracts for January delivery, which are more tightly liked to U.S gas prices, were 48 cents higher at $51.68 per barrel.