The Monday Market Minute

  • Global stocks hold modest gains to start the week, but a notable spike in the U.S. dollar has investors on edge as the Fed assumes its place as the world's sole central bank hawk. 
  • Oil spikes higher after Saudi Oil minister says Kingdom will reduce December output by 500,000 barrels in order to rebalance markets following weekend meeting in Abu Dhabi. 
  • China growth questions linger as Alibaba's Singles Day notches record $30.8 billion in sales, but records the slowest pace of growth in the event's 10-year history.
  • U.S. earnings seasons winds down with numbers from big box retailers Home Depot and Walmart this week alongside traditional rivals Nordstrom, Macy's and JC Penny.
  • US equity futures suggest a softer open on Wall Street Monday as the dollar index hits a 16-month high even as global government bond yields pullback amid global economic growth concerns.

Market Snapshot

Global stocks drifted lower Monday, with shares in Asia weakening on China growth concerns while markets in Europe slipped on Italy talks and U.S. equity futures pointed to a softer open on Wall Street, as investors continue to reset interest rate expectations from the Federal Reserve.

The U.S. dollar index, which tracks the greenback against a basket of six global currency peers,traded past a 16-month high overnight at 97.50 as both the euro and the pound drifted lower and investors raised bets on faster rate hikes from the Fed, which is essentially the only major central bank pushing a hawkish monetary policy stance, following last month's robust job creation data that also indicated the fastest pace of wage gains in nearly a decade.

The Fed's stance, as well as the underlying strength of the U.S. economy, marks a sharp contrast to the persistent weakness in China, where growth metrics continue to weaken amid the ongoing trade war between Washington and Beijing. That weakness was evidenced by the slowest growth rate for sales on Alibaba Holding Co.'s (BABA) Singles Day shopping event in ten years over the weekend even as it booked a record $30.8 billion in sales.

The region-wide MSCI Asia ex-Japan index was marked 0.5% lower heading into the final hours of trading Monday while Japan's Nikkei 225 ended 0.1% into the red, despite a weaker yen, which fell to 114.17 against the dollar, and closed at 22,269.88 points.

Early indications from U.S. equity futures suggest a softer open on Wall Street, with contracts tied to the Dow Jones Industrial Average indicating a 55-point decline for the 30-stock set while those linked to the S&P 500 are guiding to a 3.5 point pullback for the broader benchmark.

This week's earnings calendar will also provide some evidence for the strength of the American consumer against their counterparts in China, with quarterly reports expected from Home Depot (HD) , Macy's (M) , Nordstrom (JWN) , JC Penny (JCP) and Walmart (WMT) .

European stocks traded higher at the opening bell Monday, but quickly slipped into negative territory as the euro's persistent weakness, which dragged the single currency to the lowest level against the U.S. dollar in nearly two years, capped sentiment as investors kept a keen eye on developments in the budget standoff between Italy and European Union officials in Brussels.

The region-wide Stoxx 600 was marked 0.25% to the downside in the opening two hours of trading while Germany's DAX performance index edged 1% lower as export-focused stocks failed to extend gains in the wake of the euro's decline to 1.1251 against the greenback.

Britain's FTSE 100, whose constituents earn around 75% of their revenues from overseas markets, gained more than 0.2% as the pound tumbled to 1.2839 against the greenback amid a spate of weekend headlines that suggest Prime Minister Theresa May's proposed Brexit plan will be rejected by both lawmakers in London and EU officials in Brussels.

Global oil markets were also active Monday, with crude rising sharply from last week's multi-month lows after a weekend meeting of OPEC ministers, which also included Saudi Arabia's powerful energy minister Kkalid al-Falih, revealed that the Kingdom will reduce output by at least 500,000 barrels next month and could agree further reductions for next year when the full OPEC cartel, along will allies such as Russia, meet on December 6 in Vienna.

Brent crude contracts for January delivery, the global benchmark, were seen 58 higher from their Friday close in New York and changing hands at $71.76 per barrel, trimming the decline since the October 4 peak to around 16%.

WTI contracts for December, which are more tightly liked to U.S gas prices, were marked 21 cents higher at $60.40 per barrel but still some 20% from the October 4 peak of $76.41.

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