The futures for major U.S. stock indices suggest a buoyant opening on Tuesday, indicating a potential rebound following Monday's downturn. Investors are likely looking to acquire stocks at reduced prices amid Monday's sharp declines. However, trading is anticipated to be relatively muted, as attention turns to forthcoming key inflation data releases.
U.S. stocks witnessed a drop on Monday due to diminishing chances for aggressive interest rate cuts by the Federal Reserve, prompted by unexpectedly significant gains in U.S. non-payroll employment for September. Market participants are eagerly awaiting earnings reports from leading banks alongside critical economic indicators, including consumer and producer price inflation data.
The principal indices all closed significantly lower, with the Dow plunging 398.51 points or 0.9% to 41,954.24. The S&P 500 saw a decline of 55.13 points or 1.0% to 5,695.94, while the Nasdaq experienced a more substantial fall, dropping 213.95 points or 1.2% to finish at 17,923.90.
Following Friday’s positive jobs report, expectations are now set for a quarter-point interest rate cut during the Federal Reserve’s next policy meeting on November 7, with a slim possibility of rates remaining unchanged.
In geopolitical developments, Israeli defense forces have ramped up airstrikes on Gaza and Beirut, marking the first anniversary of Hamas’ cross-border assault in Israel, which ignited the Middle Eastern conflict. Airstrikes on a mosque and a former school, now serving as refugee centers, resulted in dozens of casualties, according to Gaza’s Hamas-controlled health ministry, with Israeli authorities stating Hamas militants were present there.
A slew of leading companies, including Apple, Microsoft, Alphabet, Amazon, Meta Platforms, Berkshire Hathaway, Tesla, Walmart, Visa, Procter & Gamble, Netflix, Coca-Cola, Salesforce, Merck, Accenture, Walt Disney, Nike, KKR, and ADP, registered losses between 1% to 4%. On the other hand, Pfizer rose over 2%, with Abott, IBM, Eli Lilly & Co., NVIDIA, and Exxon Mobil also ending higher.
**Commodities and Currency Markets**
Crude oil futures have dropped by $1.51 to $75.63 per barrel after gaining $2.76 to $77.14 in the previous session. Concurrently, gold futures are down $3.20 to $2,662.40 per ounce, following a previous decrease of $1.80 to $2,666 per ounce.
In the currency markets, the U.S. dollar is trading at 148.03 yen, slightly down from 148.18 yen on Monday’s close in New York. Conversely, against the euro, the dollar stands at $1.0975, virtually unchanged from $1.0976 a day earlier.
**Asian Markets**
Asian stock markets declined on Tuesday, led by substantial losses in Hong Kong despite the Chinese National Development and Reform Commission's pledge for additional economic stimulus, with scant details provided. The dollar remains near a seven-week peak, while gold has edged downward following Federal Reserve officials' cautious approach to rate cuts.
Investors are looking towards U.S. inflation data and this week's Federal Reserve meeting minutes for further insights into future interest rate policies. Oil prices in Asia dipped nearly 2% following a recent upswing.
Chinese shares surged as markets reopened after a week-long holiday, with the Shanghai Composite Index climbing 4.6% to 3,489.78, though it relinquished some early gains. Meanwhile, the Hang Seng Index in Hong Kong tumbled 9.4% to 20,926.79 amid underwhelming announcements regarding China's economic stimulus.
Japanese stocks fell, spurred by stronger-than-expected household spending data which increased demand for the yen, thereby negatively impacting exporters. The Nikkei 225 Index fell by 1% to 38,937.54, snapping a three-day winning streak, while the Topix Index slid 1.5% to 2,699.15. Notably, SoftBank Group dropped 1.9%, heavily influencing the Nikkei's performance.
Seoul’s markets dipped due to concerns over Middle Eastern tensions and uncertain Fed rate direction, with the Kospi falling 0.6% to 2,594.36. Australian stocks closed lower, dragged down by mining and tech sectors. The S&P/ASX 200 Index dipped 0.4% to 8,176.90, with the broader All Ordinaries Index similarly declining 0.4% to 8,443.70. Nevertheless, Orthocell surged 7.3% following regulatory approval for its Remplir nerve repair product in Singapore.
In New Zealand, the S&P/NZX-50 Index decreased by 0.3% to close at 12,555.99.
**European Markets**
European shares hit two-week lows on Tuesday amid ongoing Middle Eastern conflicts and a lacklustre announcement from China's state planner, offering no fresh major stimulus plans.In a surprising move, traders overlooked encouraging reports that revealed a notable recovery in German industrial production for August, following a downturn in July. According to Destatis, Germany’s industrial output increased by a robust 2.9% month-on-month in August, effectively counteracting a revised 2.9% decline from the previous month. This resurgence exceeded economists' forecasts of a modest 0.8% rebound. However, on an annual scale, industrial production experienced a 2.7% decrease, which was still an improvement over July's 5.6% reduction.
Across Europe, the market reflected a downturn, with the STOXX 600 slipping by 0.7% to 515.64, after a slight rise of 0.2% on Monday. Similarly, the German DAX saw a decrease of 0.5%, France's CAC 40 fell by nearly 1%, and the U.K.’s FTSE 100 dropped by 1.2%.
The mining sector faced significant declines, influenced by falling copper and iron ore prices, as initial enthusiasm over China’s stimulus efforts waned. Companies like Anglo American, Antofagasta, and Glencore experienced losses between 4% and 6%.
Luxury brands connected to China, including Kering, LVMH, and Hermès International, fell between 3% and 7% on the Paris market. On a similar note, spirits manufacturer Rémy Cointreau plunged 9.3%, while Pernod Ricard declined by 4.3% after China implemented temporary anti-dumping measures on EU brandy imports.
In the UK, aerospace and engineering firm Senior plummeted by 13% following a profit warning attributed to obstacles in the aerospace sector. Additionally, homebuilder Vistry saw shares plunge by 28% due to a downward revision in its fiscal 2024 profit outlook. However, Imperial Brands rose by 3.5%, as the company, known for Winston cigarettes, reported positive trading in line with expectations for fiscal 2024.
Deutz AG, a German producer of combustion engines, saw a slight increase in its stock after announcing potential job cuts as part of cost reduction strategies amidst a challenging economic climate. Meanwhile, wind turbine manufacturer Nordex SE advanced by 2.4% following the announcement of receiving orders from Canada for 74 N163 turbines with a total capacity of 500 MW from an unnamed client.
**U.S. Economic News**
In the United States, the Commerce Department reported a narrowing trade deficit for August, fueled by a surge in exports and a drop in imports. The trade deficit decreased to $70.4 billion in August from a revised $78.9 billion in July, slightly below economists' expectations of a reduction to $70.6 billion from the initially reported $78.8 billion. The decline occurred as import values increased by 2.0% to $271.8 billion, while export values dropped by 0.9% to $342.2 billion.
Later in the day, at 12:45 PM ET, Atlanta Federal Reserve President Raphael Bostic was slated to deliver remarks and partake in a moderated discussion on economic outlooks at the Atlanta consular corps luncheon. Concurrently, the Treasury Department was poised to release the outcomes of the month’s $58 billion auction of three-year notes at 1 PM ET. Furthermore, at 4 PM ET, Boston Federal Reserve President Susan Collins was scheduled to speak at the 23rd annual Regional & Community Bankers Conference. Federal Reserve Vice Chair Philip Jefferson was set to engage in a historical discussion titled "The Discount Window, 1913-2000," hosted by Davidson College at 7:30 PM ET.
