The Monday Market Minute

  • Global stocks drift lower as risk appetite wanes amid concern over rising interest rates and the outcome of Tuesday's mid-term elections in the United States.
  • Asia shares slump after weaker-than-expected data from China highlights trade war impact even as President Xi vows to increase imports and ease access to markets for foreign investors.
  • Asia shares slump after weaker-than-expected data from China highlights trade war impact even as President Xi vows to increase imports and ease access to markets for foreign investors.
  • Oil prices continue to slide, extending the quarter-to-date decline for WTI crude past 14%, even as sanctions on the sale of oil from Iran kicked-in at midnight last night.
  • U.S. equity futures point to a weaker open on Wall Street, with contracts tied to the Dow indicating a 60-point decline ahead of earnings this week from Lowes, Eli Lilly, Humana, 21st Century Fox and Walt Disney Co.

Market Snapshot

Global stocks drifted lower Monday, with heavier selling in Asia markets, as investors kept risk appetite to a minimum following last week's stronger-than-expected U.S. jobs data that has reignited bets on faster Federal Reserve rate hikes and tomorrow's mid-term elections that could change the composition -- and direction -- of Congress for at least the next two years.

With the U.S. economy adding 250,000 new jobs last month, and wages rising at the fastest pace in nearly a decade, investors are now expecting a full compliment of rate hikes from the Fed as it plots its path towards "neutral" in the months ahead. That's boosted both the U.S. dollar and Treasury bond yields, with 10-year notes edging past 3.20% in early European trading, and added pressure to U.S. equity futures into the tail end of the third quarter earnings season.

Global sentiment was also notably cautious ahead of tomorrow's mid-term elections, which the analytical website 538.com suggests says has an 85% chance of flipping the House of Representatives to the Democrats and a similar probability of Republicans holding a majority in the Senate. Both President Donald Trump and former Democratic President Barack Obama hit the stump this weekend in an effort to energize voters in the final hours of a bruising campaign, with Obama focusing on healthcare and Trump on the strength of the economy.

Markets in Asia, however, were more immediately impacted by the ongoing trade war between Washington and Beijing, a stronger U.S. dollar and further signals of slowing growth in China, where the data showed activity in the country's services sector eased to the slowest pace in more than a year this month, mirroring similar weakness reported last week in the manufacturing sector.

The region-wide MSCI Asia ex-Japan index was marked 1.15% to the downside heading into the final hours of trading while Japan's Nikkei 225 closed 1.55% lower at 21,898.99 points, with most market failing to get a boost from comments by China's President, Xi Jinping, who told a business audience in Shanghai that "China will not close its door to the world and will only become more and more open" despite what he called the "dead-end alleys" of rising protectionism. 

Early indications from U.S. equity futures suggest a modest bump higher on Wall Street, with contracts tied to the Dow Jones Industrial average indicating a 26-point opening bell gain while those linked to the S&P 500 suggest a 3 point advance for the broader benchmark, a move that would trim its fourth quarter decline to around 6.5%.

Apple Inc. (AAPL shares extended declines Monday, following its biggest decline in four years last week, after a report from Japan's Nikkei business newspaper that the tech giant is asking assemblers in Asia to scrap some additional production plans amid tepid demand for its new iPhone XR.

Apple shares were marked 1% lower in pre-market trading Monday, indicating an opening bell price of $205.51 each, a move that would still leave it with a year-to-date advance of around 22%, but extend its quarterly loss to 8.7% and value the Cupertino, Calif.-based group at just under $1 trillion.

European stocks were also weaker in the opening hour of trading, with the Stoxx 600 falling modestly into the red, but rose 0.21% by mid-day in Frankfurt as bank shares were active following the weekend publication of European Central Bank stress tests for the region's biggest lenders, which showed surprising resilience for those in Italy and unexpected weakness for two of the U.K's largest -- Barclays (BCS  and Lloyds (LYG -- linked to the ongoing uncertainty over Brexit. The Bank of England will publish separate stress tests, which could trigger demands for fresh capital, on December 5.

Global oil markets extended declines once again Monday, taking the quarter-to-date decline for U.S. prices past 14%, as the first day of sanctions on the sale of Iranian crude kicked in at midnight last night. Several State Department waivers, however, as well as a consistent build-up in U.S. crude stocks and near-record production rates from Russia, Saudi Arabia and the United States have keep markets awash with oil and push prices mid-August lows.

Brent crude contracts for January delivery, the global benchmark, were seen 22 cents lower from their Friday close in New York and changing hands at $72.60 per barrel , extending their fourth quarter decline past 12.5%, while WTI contracts for the same month, which are more tightly liked to U.S gas prices, were marked 32 cents lower at $62.82 per barrel.