The Thursday Market Minute
- Emerging market weakness and ongoing U.S.-China trade tensions has global stocks on the back foot Thursday, with Asia shares sliding to a multi-week low.
- President Trump could slap a further 25% tariff on $200 billion worth of China-made goods as early as today, but insists no plans are in place and talks are ongoing.
- Emerging market equities are just a few ticks from bear market territory as investors flee risk markets around the world, threatening potential contagion in stocks elsewhere.
- U.S. equity futures point to another day of red of Wall Street, with the S&P 500 priced for a 6.1 point decline.
Global stocks extended declines Thursday as emerging market equities teetered on the edge of bear market territory, although U.S. equity futures trended higher even as investors braced for another potentially damaging escalation in the ongoing trade war between the U.S. and China.
Emerging market currencies in the Asia region resumed their slide in overnight trading, with the Philippine peso nursing heavy losses as stocks fell 2.4% -- the most in two months -- as the southeast Asian economy joined a growing list under performing assets around the world. The MSCI Emerging Markets index, which fell 1.77% Wednesday, is within just a few points of a 20% decline from its Jan. 29 peak, a move that would tip the global benchmark into bear market territory.
The threat of contagion from the emerging market sell-off, which has been accelerated by the strength of the U.S. dollar, clipped gains for Asian stocks once again Thursday, sending the MSCI Asia ex-Japan index 0.88% lower into the final hours of trading and pushing Japan's Nikkei 225 0.4% into the red for its fourth consecutive decline.
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Investors were also eyeing developments in the U.S.-China trade war now that a public consultation on the impact of fresh tariffs on $200 billion worth of China-made goods concludes later today, allowing President Donald Trump to apply them whenever he sees fit.
"We've done very well in negotiations with China but we're not prepared to make the deal that they'd like to make," Trump told reporters yesterday in Washington. "We'll continue to talk to China. I have great respect for President Xi. But right now we just can't make that deal."
The conciliatory tone didn't help stocks in China, however, as the emerging market chaos bled into trading in the world's second largest economy, pushing the Shanghai Composite index 0.5% lower and clipping another 1.35% from the Hang Seng index in Hong Kong as China's Commerce Ministry said the country would be forced to retaliate if the U.S. were to go ahead with the new tariff threat.
U.S. equity futures look set to reverse some of this week's decline, which has trimmed around 0.27% from the S&P 500
Tech and social media stocks are likely to be in focus once again Thursday after U.S. Attorney General Jeff Sessions announced he would meet with state attorneys general on Sept. 25 to discuss whether social media platforms were standing in the way of free speech, particularly for conservative lawmakers and commentators.
The move followed a day of heavy losses for Facebook Inc. (FB and Twitter Inc. (TWTR after senior executives, including Twitter CEO Jack Dorsey, faced tough questions from lawmakers on the Senate Intelligence Committee over their role in preventing malign influences on the U.S. election process.
Watch what TheStreet thinks of the spectacle below.
European markets were in-and-out of positive territory for much of the session, with the Stoxx Europe 600 last seen 0.01% lower by mid-after noon in Frankfurt. Britain's FTSE 100 edged 0.2% lower by mid-day in London as the pound rose to 1.2936 against the dollar after a report from Bloomberg news said British and Germany officials could reach a compromise on certain terms in Brexit negotiations.
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Away from equities, the U.S. dollar index eased from a two-week high in overnight trading to change hands at 95.05, although the greenback is expected to add further gains as the Federal Reserve signals future rate hikes amid a surging domestic economy, which is on pace for a 4.7% advance this quarter, according to the Atlanta Fed's GDPNow estimate, following data Tuesday showing U.S. manufacturing activity hit the fastest pace in 14 months.
Global oil prices were modestly firmer in overnight trading, although investors cited the impact of waning emerging market demand, as well as less-than-anticipated impact of tropical storm Gordon on drilling installations in the U.S. Gulf, as putting a cap on gains, although lingering concerns over U.S. sanctions on the sale of Iranian crude have set a high floor for prices.
Brent crude contracts for November delivery, the global pricing benchmark, were 18 cents higher from their Wednesday close in New York and changing hands at $77.43 per barrel while WTI contracts for the same month were marked 3 cents higher at $68.45 per barrel.