Wednesday July 6th

6-07-2016

Street set for another lower open with Dow futures off 100; yields fall

U.S. stock index futures pointed to a lower open Wednesday as benchmark Treasury yields held near record lows and overseas stocks fell. Dow futures fell more than 100 points, while S&P and Nasdaq futures dropped 12 points and 30 points, respectively. Brexit and global growth fears pushed investors back into "risk-off" mode on Tuesday and this continued on Wednesday. The latest spur was the suspension of three U.K. commercial property funds this week, which was seen by some as the first sign of markets seizing up following the U.K.'s vote to leave the European Union. The benchmark 10-year U.S. Treasury note yield was near 1.336 percent on Wednesday, below Tuesday's record low of 1.357 percent. Bond yields move inversely to prices. The 30-year Treasury yield hit a fresh record low of 2.098 percent, according to Reuters. Overnight, pound sterling hit a 31-year low and was last trading slightly above that level around $1.297. The U.S. dollar index traded a touch lower, with the euro near $1.108 and the yen near 100.7 yen versus the greenback as of 8:42 a.m. ET. The U.S. May trade deficit was $41.1 billion versus $37.4 billion the prior month. The ISM Services index for June is also due for release. Plus, there will be the Federal Open Market Committee minutes for the meeting last month, which pre-dates the U.K. referendum vote to leave the European Union. Friday's official non-farm payroll will be the next big data event. "Any further deceleration in the pace of U.S. employment (and hence economic) growth would take the global economy even closer to stalling speed," Kit Juckes, strategist at Societe Generale, said in a note on Wednesday. Walgreens Boots Alliance reported ex-items earnings of $1.18 a share that beat expectations on revenue of $29.5 billion that missed forecasts, Reuters said. The firm didn't discuss impact from Brexit to its business, while raising the lower end of its full-year adjusted profit forecast. Markets in Asia sold off on Wednesday, as investors scurried into safe-haven plays on global growth concerns, sending bond yields to record lows. Renewed Brexit jitters also sent the British pound tumbling to a fresh 31-year low. Japan's Nikkei 225 closed down 290.34 points, or 1.85 percent, at 15,378.99, after earlier tumbling as much as 3.2 percent on the back of fresh yen strength. The Japanese yen, a safe-haven asset, traded at 101.04 as of 3:06 p.m. HK/SIN, after the pair traded as low as 100.56 earlier and compared with levels near 103 on Friday. Australia's ASX 200 closed down 30.50 points, or 0.58 percent, at 5,197.50, with the energy, materials and the heavily-weighted financials weighing. South Korea's Kospi dropped 36.73 points, or 1.85 percent, to 1,953.12, while Hong Kong's Hang Seng index tumbled 1.6 percent in afternoon trade. On the Chinese mainland, the Shanghai composite bucked the trend, closing up 10.70 points, or 0.36 percent, at 3,017.09 after wavering between positive and negative territory throughout the session. Oil prices edged lower on Wednesday, extending losses to a third straight session, as a stronger dollar weighed and economic concerns rose following Britain's vote to leave the European Union. Investors also awaited data on U.S. crude inventories, which are delayed until Thursday due to Monday's Independence Day holiday. Global benchmark Brent futures were down 62 cents at $47.34 a barrel at 8 a.m. ET (1200 GMT) after a 4.1-percent drop on Tuesday. U.S. crude traded at $46.11 a barrel, down 49 cents. The contract fell 5 percent to end at $46.60 on Tuesday. Gold hit its highest in more than two years on Wednesday as a drop in stock markets and a slide in some bond yields to record lows after Britain's vote to leave the European Union prompted investors to seek out bullion as a haven from risk. European equities fell and Germany's 10-year bond yield slid to a record low for a second day on Wednesday, as fears about the impact of Brexit on economic growth gripped global markets and underpinned demand for safe-haven bonds. Spot gold was up 1.2 percent at $1,371.91 an ounce, while U.S. gold futures for August delivery were up $15.50 an ounce at $1,374.20.