Monday March 25th

25-03-2019

Stock futures decline as global growth concerns outweigh positive Mueller outcome for Trump

U.S. stock index futures pointed to a small decline on Monday as concerns over the outlook for the global economy continued to weigh on investor sentiment even after the special counsel found no collusion with Russia on the part of President Donald Trump. At 7:25 a.m. ET, the Dow Jones Industrial Average futures were down 49 points, indicating a decline of 5.32 points at the open. S&P 500 and Nasdaq 100 futures also pointed to a lower open. The moves came amid a global stock decline in Monday's session, both in Asian and Europe. Japan's Nikkei 225 index dropped 3 percent, while German and French equities also declined. Worries over the global economic outlook were stoked on Friday after the so-called yield curve inverted for the first time in more than a decade. The 3-month Treasury bill yield topped its 10-year counterpart on Friday, thus inverting the yield curve. Investors consider this to be a signal that a recession may be coming soon. Disappointing economic data released Friday out of Europe, coupled with a downgraded economic outlook from the Federal Reserve, added to those concerns. U.S. stock futures initially pointed to solid gains Sunday after Attorney General William Barr said special counsel Robert Mueller's long-awaited investigation did not find enough evidence that Trump's 2016 campaign colluded with Russia. In a letter to top lawmakers, Barr wrote: "The Special Counsel's investigation did not find that the Trump campaign or anyone associated with it conspired or coordinated with Russia in its efforts to influence the 2016 U.S. presidential election." The White House also said the results are a "total and complete exoneration of the president of the United States." Mueller's investigation had been a lingering concern for investors as it could have hindered Trump's efforts to further cut taxes and further ease regulations on corporations. The news removes a worry for Wall Street and can help the administration focus on more pressing issues for the market, such as striking a trade deal with China or even working with Democrats on an infrastructure plan. "This cloud has now dissipated and this should allow markets to breathe a sigh of relief," said Jeff Kilburg, CEO of KKM Financial. "This could be a real positive for the market if it allows Trump to focus on getting the Chinese trade deal concluded." The investigation nagged the Trump administration for nearly two years. It led to the indictment and arrest of several Trump's operatives, including ex-campaign manager Paul Manafort. Manafort was sentenced to 47 months in jail for fraud earlier this month. Investors across the world worried the probe could also bring down Trump himself by potentially leading to his impeachment. Now, Wall Street can remove one block from the proverbial wall of worry and eye the ongoing U.S.-China trade talks. China and the U.S. are expected to strike a deal sometime in April. Sentiment around the negotiations improved this year to help lift stocks to within striking distance of their record highs set last year. White House press secretary Sarah Huckabee Sanders said Saturday that Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer were headed to Beijing for further talks on Thursday. Trade worries plagued investors for most of last year as they worried a prolonged trade war between the world's largest economies could hinder corporate profits. The S&P 500 is up nearly 31 percent since Trump was elected in 2016. One key catalyst for the move higher in that time is a massive corporate tax cut signed by Trump in late 2017. "My instincts are that, at least at first pass, it seems to be relatively favorable," said Nathan Sheets, chief economist at PGIM Fixed Income, referring to the Mueller investigation ending. "Where all of this really connects to markets and markets outlook is implications for tax policy going forward. The sense has been if Trump is damaged, the tax cuts that were put in place could be reversed or — given the rhetoric we're hearing — taxes could even be increased." Meanwhile, Monday's calendar is thin with only Winnebago due to report earnings before the bell. In terms of data, the Dallas Fed manufacturing numbers will be out at 10.30 a.m. ET. Wall Street also watched shares of Apple as the tech giant is expected to unveil a new streaming service at an event later in the day. In the premarket, Apple traded slightly lower. Shares in Asia fell sharply on Monday after disappointing economic data from Europe and a closely-watched signal of potential recession in the U.S. appeared on Friday. The Nikkei 225 plunged 3.01 percent to close at 20,977.11. The Topix index also fell 2.45 percent to finish its trading day at 1,577.41. Shares in mainland China tumbled on the day, with the Shanghai composite dropping 1.97 percent to 3,043.03 and the Shenzhen component declining 1.8 percent to 9,701.70. The Shenzhen composite fell 0.908 percent. Meanwhile, the Hang Seng index in Hong Kong dropped 1.98 percent in its final hour of trading. In South Korea, the Kospi declined 1.92 percent to close at 2,144.86. Oil prices slipped on Monday, with concerns of a sharp economic slowdown outweighing supply disruptions from OPEC's production cutbacks and from U.S. sanctions on Iran and Venezuela. Brent crude oil futures were at $66.73 per barrel at 0752 GMT, down 30 cents, or 0.5 percent, from their last close. U.S. West Texas Intermediate (WTI) futures were at $58.69 per barrel, down 35 cents, or 0.6 percent, from their previous settlement. Both crude oil price benchmarks have slumped by almost 3 percent since last week hitting their highest since November 2018. Gold rose on Monday as investors flocked towards safe-haven assets on concerns over a possible recession in the United States that dented the dollar and added to an increasingly bleak picture on global growth. Spot gold gained 0.3 percent to $1,316.58 an ounce. The metal last week posted its third consecutive weekly gain with a rise of about 1 percent. U.S. gold futures were up 0.3 percent at $1,316.70.