Morning Call: Global stocks slide on trade concerns; Dec E-mini S&Ps down -1.66% at a 1-week low; Mar COMEX copper down -1.98% at a 3-week low.
Barchart.com - Thu Dec 06, 9:34AM CST
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Overnight Markets and News

Dec E-mini S&Ps (ESZ18 -1.74%) this morning are down sharply by -1.66% at a 1-week low and European stocks plunged -2.35% to a 2-year low. Concern about global trade fueled a slide in world equity markets after Huawei Technologies Company's CFO was arrested in Canada over potential violations of U.S. sanctions on Iran. Technology stocks sank after the arrest of Wanzhou Meng, who is CFO and daughter of Huawei's founder and also faces extradition to the U.S. Her arrest prompted a strong protest from the Chinese embassy in Canada and threatens the recent trade truce between China and the U.S. A slide in energy stocks is also pushing the overall market lower with Jan WTI crude oil (CLF19 -4.03%) down sharply by -2.38% after Saudi Oil Minister Khalid Al-Falih told reported in Vienna, where OPEC members are meeting, that there is currently no agreement among producers to cut output. The slide in global stock markets has boosted safe-haven demand for government debt and driven down yields to multi-month lows as the 10-year German bund yield tumbled to a 6-month low of 0.242% and the U.S. 10-year T-note yield dropped to a 3-month low of 2.872%. Asian stocks settled lower: Japan -1.91%, Hong Kong -2.47%, China -1.68%, Taiwan -2.34%, Australia -0.19%, Singapore -1.28%, South Korea -1.59%, India -1.59% . Asian markets slumped, with Japan's Nikkei Stock Index falling to a 2-week low, as the arrest of a Chinese technology executive in Canada threatens to ratchet up trade tensions between the U.S. and China.

The dollar index (DXY00 -0.44%) is down -0.01%. EUR/USD (^EURUSD +0.50%) is down -0.03%. USD/JPY (^USDJPY -0.70%) is down -0.32% at a 2-week low as the slump in stocks boosts the safe-haven demand for the yen.

Mar 10-year T-note prices (ZNH19 +0-205) are up +7.5 ticks at a 3-month high.

German Oct factory orders unexpectedly rose by +0.3% m/m, stronger than expectations of -0.4% m/m.

The German Nov Markit construction PMI rose 1.5 to 51.3, the first increase in three months.

U.S. Stock Preview

Key U.S. news today includes: (1) Nov Challenger job cuts (Oct +153.6% y/y), (2) Nov ADP employment change (expected +195,000, Oct +227,000), (3) weekly initial unemployment claims (expected -9,000 to 225,000, previous +10,000 to 234,000) and continuing claims (expected -15,000 to 1.695 million, previous +50,000 to 1.710 million), (4) Oct trade balance (expected -$55.0 billion, Sep -$54.0 billion), (5) revised Q3 non-farm productivity (expected +2.3%, previous +2.2%), (6) final-Nov Markit US services PMI (expected unrevised at 54.4, prelim Nov 54.4), (7) Nov ISM non-manufacturing (expected -1.3 to 59.0, Oct -1.3 to 60.3), (8) Oct factory orders (expected -2.0%, Sep +0.7 and +0.4% ex transportation), (9) EIA weekly Petroleum Status Report, (10) Atlanta Fed President Raphael Bostic (voter) discusses the national outlook at an economic conference in Atlanta, (11) New York Fed President John Williams (voter) holds a discussion with Mervyn King in New York, (12) Fed Chair Jerome Powell gives brief welcoming remarks at a housing conference in Washington, D.C.

Notable Russell 1000 earnings reports today include: Kroger (consensus $0.43), Cooper Cos (2.97), Broadcom (5.56), Ulta Beauty (2.16), DocuSign (-0.02), Lululemon Athletica (0.70), Toro (0.34), Michaels (0.44), H&R Block (-0.93).

U.S. IPO's scheduled to price today: Mercantil Bank Holding Corp (AMTB), Synthorx Inc (THOR), DiaMedica Therapeutics (DMCAD).

Equity conferences during the remainder of this week: Media and Telecommunications Conference on Tue-Thu, Citi Global Health Care Conference on Wed-Thu, Barclays Gaming, Lodging, Leisure, Restaurant and Food Retail Conference on Wed-Thu.


Market Comments

Dec S&P 500 E-minis (ESZ18 -1.74%) this morning are down sharply by -44.75 points (-1.66%) at a 1-week low. S&P 500 -3.24%, Dow Jones -3.10%, Nasdaq 100 -3.78%. The S&P 500 on Tuesday closed sharply lower on skepticism about Saturday's U.S./Chinese trade ceasefire. There was also weakness in technology stocks led by a 4% plunge in Apple and a sell-off in its suppliers on iPhone demand concerns.

Mar 10-year T-notes (ZNH19 +0-205) this morning are up +7.5 ticks at a fresh 3-month high. Tuesday's closes: TYH9 +13.50, FVH9 +5.75. Mar 10-year T-notes on Tuesday rallied to a 3-month high and closed higher on safe-haven demand for T-notes with the sharp sell-off in stocks. T-notes were also boosted by carry-over support from a rally in 10-year German bunds to a 6-month high. There was also technical buying in T-note futures after the 10-year T-note yield fell below its 200-day moving average of 2.956%.

The dollar index (DXY00 -0.44%) this morning is down -0.006 (-0.01%), EUR/USD (^EURUSD +0.50%) is down -0.0003 (-0.03%), and USD/JPY (^USDJPY -0.70%) is down -0.36 (-0.32%) at a 2-week low. Wednesday's closes: Dollar Index +0.105 (+0.11%), EUR/USD +0.0001 (+0.01%), USD/JPY +0.42 (+0.37%). The dollar index on Wednesday closed higher on a rebound in E-mini stock index futures following Tuesday's sharp sell-off, which boosted USD/JPY on reduced safe-have demand for the yen. There was a slump in the Canadian dollar to a 5-month low against the dollar after dovish comments from the Bank of Canada, which said the Canadian CPI is expected to ease more than forecast in the coming months due to lower gasoline prices.

Metals prices this morning are weaker with Feb gold (GCG19 +0.43%) -0.8 (-0.06%), Mar silver (SIH19 -0.36%) -0.142 (-0.97%), and Mar copper (HGH19 -1.80%) -0.055 (-1.98%) at a 3-week low. Wednesday's closes: Feb Comex gold (GCG19) on Wednesday closed down -4.0 (-0.32%) and Mar Comex silver (SIH19) closed down -0.058 (-0.40%). A stronger dollar Wednesday weighed on metals prices. Also, negative carry-over from New York Fed President Williams' comments on Tuesday continue to weigh on metals prices when he said he expects the U.S. economy to continue to grow at a strong rate and that "further gradual increases" in interest rates will "best foster" the Fed's goals. Finally, a rebound in Dec E-mini S&P futures in overnight trade undercut metals prices on reduced safe-haven demand. Cash equity markets were closed on Wednesday for a national day of mourning for President George H.W. Bush, although electronic Globex trading for E-mini stock index futures was open until 0830 CST.

Jan WTI crude oil prices (CLF19 -4.03%) this morning are down -$1.26 per barrel (-2.38%) and Jan gasoline (RBF19 -2.70%) is down -3.53 cents per gallon (-2.44%). Wednesday's closes: Jan WTI crude oil (CLF19) on Wednesday closed down by -$0.36 per barrel (-0.68%) and Feb Brent crude (CBG19) closed down -$0.52 (-0.84%). Jan RBOB gasoline (RBF19) closed up by +0.22 cents per gallon (+0.15%). Crude prices on Wednesday gave up an early rally and moved lower after an OPEC+ committee recommended an oil production cut but did not agree on an amount that crude production should be cut. Crude prices maintained their losses Wednesday after Oman's Oil Minister said OPEC+ could agree on a 1 million bpd cut in crude production, which would be below the -1.3 million bpd cut that OPEC+ delegates said last week would be needed as demand growth slows and U.S. shale production surges. A stronger dollar Wednesday was another negative factor for crude prices. API data late Tuesday afternoon was bearish as it showed U.S. crude supplies rose +5.36 million bbl last week. Thursday's weekly EIA inventory data is expected to show U.S. crude supplies fell -2.0 million bbl last week.

Overnight U.S. Stock Movers

Macy's (M -2.56%) was downgraded to 'Underweight' from 'Neutral' at Atlantic Equities LLP with a price target of $28.

Twitter (TWTR -2.46%) was rated a new 'Buy' at Guggenheim Securities with a price target of $39.

NetEase (NTES +2.15%) was upgraded to 'Overweight' from 'Equal-Weight' at Morgan Stanley with a price target of $300.

Concho Resources (CXO -6.10%) was rated a new 'Buy' at MKM Partners with a price target of $176.

Trade Desk (TTD -5.20%) slid more than 2% in after-hours trading after the company announced that COO Rob Perdue will step down after a transition period in the first half of 2019.

MongoDB (MDB -1.54%) gained more than 1% in after-hours trading after it reported Q3 revenue of $65 million, higher than consensus of $60.3 million and then forecast Q4 revenue of $73 million to $74 million, well above consensus of $64.8 million.

Cimarex (XEC -6.81%) was rated a new 'Buy' at MKM Partners with a price target of $108.

Ollie's Bargain Outlet Holdings (OLLI -13.73%) fell 4% in after-hours trading after it forecast full-year adjusted EPS of $1.74 to $1.77, below consensus of $1.79.

Elastic NV (ESTC +4.14%) climbed 4% in after-hours trading after it reported Q2 revenue of $63.6 million, higher than consensus of $55.6 million, and then forecast Q3 revenue of $64 million to $66 million, better than consensus of $58.4 million.

Marathon Oil (MRO -5.23%) was rated a new 'Buy' at MKM Partners with a price target of $26.

Noble Energy (NBL -3.62%) was rated a new 'Overweight' at Stephens with a price target of $40.

Guidewire (GWRE -8.84%) fell 3% in after-hours trading after it forecast full-year revenue of $722 million to $732 million, weaker than consensus of $749.4 million.

Marvel Technology Group Ltd (MRVL +1.74%) rose more than 5% in after-hours trading after it reported Q3 net revenue of $851.1 million, better than consensus of $844 million.

Inseego (INSG +2.69%) rallied more than 3% in after-hours trading after the company said it and Verizon will unveil MiFi 5G NR mobile broadband technology today in Maui.