Morning Call: Ramped up U.S./China trade tensions undercuts stocks and commodities; Sep E-mini S&Ps down -0.11%; Sep COMEX copper down -2.53% at a 1-week low.
Barchart.com - Wed Aug 01, 6:42AM CDT
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 ESU18 - S&P 500 E-Mini
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ZEN61.71-0.49-0.79%
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Overnight Markets and News

Sep E-mini S&Ps (ESU18 -0.07%) this morning are down -0.11% and European stocks are down 0.25% on ramped up trade tensions between the U.S. and China after people familiar with the matter said the U.S. is considering raising tariffs on $200 billion of Chinese goods to 25% from 10% in coming days. China warned the U.S. against "blackmailing and pressuring" and said it will fight back should the U.S. further increase tariffs. Metals prices tumbled as trade tensions fueled economic growth concerns with Sep COMEX copper (HGU18 -2.58%) down -2.53% at a 1-week low, which undercut mining stocks and commodity producers. Sep WTI crude oil (CLU18 -1.11%) is down -0.99% at a 1-week low and is dragging energy stocks lower after the API reported late Tuesday that U.S. oil crude stockpiles rose 5.59 million bbl last week. Losses in the overall market were limited on strength in technology stocks with Apple up over 3% in pre-market trading after it forecast higher than expected Q4 revenue. Asian stocks settled mixed: Japan +0.86%, Hong Kong -0.85%, China -1.80%, Taiwan +0.37%, Australia -0.07%, Singapore +0.27%, South Korea +0.42%, India -0.23%. Chinese stocks retreated as the Shanghai Composite fell to a 1-week low on increased trade tensions and growth concerns after the China Jul Caixin manufacturing PMI fell -0.2 to an 8-month low of 50.8. A rally in USD/JPY to a 1-week high boosted Japanese exporters and lifted the Nikkei Stock Index to a 1-week high.

The dollar index (DXY00 +0.09%) is up +0.02% ahead of the FOMC interest rate decision later this afternoon. EUR/USD (^EURUSD -0.04%) is down -0.08%. USD/JPY (^USDJPY -0.03%) is up +0.04% at a 1-week high.

Sep 10-year T-note prices (ZNU18 -0-040) are down -4 ticks.

The German Jul Markit/BME manufacturing PMI was revised downward to 56.9 from the previously reported 57.3.

The UK Jul Markit manufacturing PMI fell -0.3 to 54.0, weaker than expectations of -0.2 to 54.2.

The China Jul Caixin (flash) manufacturing PMI fell -0.2 to 50.8, weaker than expectations of -0.1 to 50.9 and the slowest pace of expansion in 8 months.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -0.2% to 362.4 with purchase sub-index -1.0% to 245.5 and refi sub-index +0.9% to 988.6), (2) Jul ADP employment (expected +186,000, Jun +177,000), (3) final-Jul Markit manufacturing PMI (expected unrevised at 55.5, prelim-July +0.1 to 55.5), (4) Jul ISM manufacturing index (expected -0.9 to 59.3, Jun +1.5 to 60.2), (5) Jun construction spending (expected +0.3% m/m, May +0.4% m/m), (6) EIA weekly Petroleum Status Report, (7) FOMC announces interest rate decision (1.75%-2.00% fed funds target range expected unchanged), and (8) Jul total vehicle sales (expected 17.05 million, Jun 17.38 million).

Notable S&P 500 earnings reports today include: TripAdvisor (consensus $0.40), Williams Cos (0.17), Public Storage (2.61), Wynn Resorts (1.96), Allstate (1.52), MetLife (1.17), Marathon Oil (0.20), Lincoln National (2.10), Prudential Financial (3.07), Apache (0.40), Dominion Energy (0.79), Humana (3.78), Molson Coors Brewing (1.83).

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: none.


Market Comments

Sep S&P 500 E-minis (ESU18 -0.07%) this morning are down -3.00 points (-0.11%). Tuesday's closes: S&P 500 +0.49%, Dow Jones +0.43%, Nasdaq 100 +0.54%. The S&P 500 on Tuesday closed higher on hopes for reduced trade tensions on reports that the U.S. and China are attempting to restart trade negotiations. Stocks were also supported by positive economic data with the as-expected +0.4% increases in U.S. Jun personal income and personal spending and the unexpected +1.4 point increase in the Jul Chicago PMI to a 6-month high of 65.5 (stronger than expectations of -2.1 to 62.0).

Sep 10-year T-notes (ZNU18 -0-040) this morning are down -4 ticks. Tuesday's closes: TYU8 +1.50, FVU8 +0.25. Sep 10-year T-notes on Tuesday closed higher on a rally in global bond markets spurred on by the BOJ which cut its inflation forecast and maintained its zero percent 10-year bond yield target. T-notes were also supported by the +1.9% y/y increase in the U.S. Jun core PCE deflator, slightly weaker than expectations of +2.0% y/y, which helped reduce inflation expectations as the 10-year T-note breakeven rate fell to a 1-week low.

The dollar index (DXY00 +0.09%) this morning is up +0.017 (+0.02%). EUR/USD (^EURUSD -0.04%) is down -0.0009 (-0.08%). USD/JPY (^USDJPY -0.03%) is up +0.05 (+0.04%) at a 1-week high. Tuesday's closes: Dollar Index +0.169 (+0.18%), EUR/USD -0.0015 (-0.13%), USD/JPY +0.82 (+0.74%). The dollar index on Tuesday closed higher on a rally in USD/JPY to a 1-week high after the yen weakened when the BOJ cut its inflation forecast for this year and signaled it will not end QE anytime soon. The dollar also saw support from the stronger-than-expected U.S. economic data on Jul Chicago PMI and Jul consumer confidence.

Metals this morning are weaker with Dec gold (GCZ18 -0.13%) -1.0 (-0.08%), Sep silver (SIU18 -0.51%) -0.069 (-0.44%) and Sep copper (HGU18 -2.58%) -0.072 (-2.53%) at a 1-week low. Tuesday's closes: Dec gold +2.1 (+0.17%), Sep silver +0.022 (+0.14%), Sep copper +0.0396 (+1.41%). Metals on Tuesday closed higher on the action by the BOJ to maintain its QE program and its pledge that interest rates will stay low for an "extended period of time." Metals prices were also boosted by reports that the U.S. and China may restart trade negotiations, which may lead to a resolution of the trade conflict that boosts economic growth and demand for industrial metals. Metals prices were undercut by the mildly stronger dollar.

Sep WTI crude oil (CLU18 -1.11%) this morning is down -68 cents (-0.99%) at a 1-week low. Sep gasoline (RBU18 -0.70%) is -1.16 cents (-0.56%). Tuesday's closes: Sep crude -1.37 (-1.95%), Sep gasoline -3.27 (-1.55%). Sep crude oil and gasoline on Tuesday closed lower on a stronger dollar and President Trump's overture for talks with Iranian President Hassan Rouhani with "no preconditions," although Iran refused.

Overnight U.S. Stock Movers

Universal Health Services (UHS -2.29%) was downgraded to 'Market Perform' from 'Outperform' at BMO Capital Markets.

Apple (AAPL +0.20%) climbed more than 3% in pre-market trading after it forecast Q4 revenue of $60 billion to $62 billion, above consensus of $59.4 billion.

Ultimate Software Group (ULTI +1.37%) rose almost 3% in after-hours trading after it reported Q2 revenue of $271.2 million, higher than consensus of $268.6 million, and then forecast Q3 revenue of $286 million to $288 million, better than consensus of $278.4 million.

Synaptics (SYNA +0.70%) dropped 8% in after-hours trading after Dialog Semiconductor said it ended talks on a potential acquisition of Synaptics.

Paycom Software (PAYC +3.04%) climbed more than 9% in after-hours trading after it reported Q2 revenue of $128.8 million, higher than consensus of $124.6 million, and then forecast full-year revenue of $554 million to $556 million, better than consensus of $547.1 million.

Molina Healthcare (MOH +1.31%) surged 18% in after-hours trading after it reported Q2 revenue of $4.88 billion, well above consensus of $4.67 billion.

Cheesecake Factory (CAKE -2.05%) slid almost 4% in after-hours trading after it reported Q2 adjusted EPS of 65 cents, below consensus of 81 cents.

Bandwidth (BAND -0.06%) rose 3% in after-hours trading after it reported Q2 revenue of $48.3 million, higher than consensus of $45.3 million.

Zendesk (ZEN -1.93%) jumped 7% in after-hours trading after it reported Q2 revenue of $141.9 million, above consensus of $137.5 million, and then forecast full-year revenue of $582 million to $586 million, higher than consensus of $571.4 million.

McDermott International (MDR -0.39%) lost almost 3% in after-hours trading after it reported Q2 revenue of $1.74 billion, well below consensus of $2.39 billion.

ZAGG (ZAGG +1.71%) tumbled 9% in after-hours trading after it reported Q2 EPS of 11 cents, weaker than consensus of 17 cents.

The Container Store Group (TCS +0.15%) rallied nearly 17% in after-hours trading after it forecast full-year net sales of $890 million to $900 million, better than consensus of $880.3 million.

Big 5 Sporting Goods (BGFV -0.77%) slumped 16% in after-hours trading after it reported Q2 net sales of $240 million, weaker than consensus of $24 7million.