U.S. Stocks to Open Lower Ahead of Fed Testimony
July 10 2019 - 8:53AM
Dow Jones News
By Nathan Allen
-- U.S. futures, European equities decline
-- Asian stocks mostly advance
-- Pound weakens amid continuing U.K. political uncertainty
U.S. futures and European stocks slipped Wednesday as investors
awaited Federal Reserve Chairman Jerome Powell's congressional
testimony, where he will face questions on the central bank's
interest rate intentions.
Futures on the S&P 500 and the Dow Jones Industrial Average
both fell around 0.2%. Futures don't necessarily predict moves
after the market open. The yield on 10-year U.S. Treasurys rose to
2.101% from 2.058% on Tuesday. Yields and prices move in opposite
directions.
Europe's pan-continental Stoxx Europe 600 fell 0.1% in afternoon
trade to extend Tuesday's losses, dragged down by food-and-beverage
and media stocks. Benchmark indexes in France and Germany also
posted modest declines.
Banking stocks were among the region's best performers, with
Germany's Deutsche Bank rallying 2.7% to recover some of its
losses. Shares in the German lender dropped earlier in the week as
investors reacted with skepticism to Chief Executive Christian
Sewing's radical restructuring program.
Data showed the British economy returned to growth in May,
reversing a two-month slowdown and easing fears of a contraction in
the second quarter. A 24% rise in car production drove the uptick,
as auto makers restarted factories they had idled in anticipation
of Brexit, which was originally scheduled to take place in
April.
However, analysts cautioned that the broader economic picture in
the U.K. remains subdued, despite the improvement in
manufacturing.
"Recent PMIs indicate that the service sector -- which makes up
the lion's share of the U.K. economy -- has struggled to regain
momentum amid mounting Brexit uncertainty," said James Smith, ING
developed markets economist, adding that he expects business
investment to resume its downward trend over the summer.
The pound rose slightly after the data but still hovered around
multi-month lows against the euro, while the FTSE 100 index was
flat in afternoon trade.
Global stock markets rallied in June amid hopes for an
interest-rate cut, but strong jobs data from the U.S. reduced the
case for such an intervention, adding to uncertainty around the
Fed's policy direction.
Peter Dixon, senior economist at Commerzbank, said there are
fairly good reasons for a rate cut in July or September, but warned
that the central bank risks running out of firepower if it acts too
soon.
"If the Fed front loads easing now while the economy is still
robust and leaves less in its locker for when things really do
start to slow down, that could very much be a problem for the
U.S.," he said.
Aside from the Fed's policy outlook, Mr. Dixon said investors
will be eager to see how Mr. Powell responds to a grilling from
lawmakers over concerns that his independence is being undermined
by pressure from President Trump, who has criticized him for
allowing the dollar to become too strong.
Minutes from the central bank's recent policy meeting are due
for release later Wednesday, which could provide additional detail
on how officials viewed the economic environment.
Asian markets mostly closed higher, although Shanghai-listed
stocks slipped after Chinese consumer inflation held steady in
June. The consumer-price index rose 2.7% on year, in line with
expectations, as slowing nonfood prices offset faster gains in food
prices.
The Mexican peso continued to trade lower against the dollar on
Wednesday after the country's finance minister Carlos Urzúa
resigned on Tuesday, citing disagreements with left-wing President
Andrés Manuel López Obrador's economic policy.
In commodities, global oil benchmark Brent crude rose 2.3% to
$65.64 a barrel after data from U.S. industry group American
Petroleum Institute on Tuesday showed a sharp drop in oil stocks.
Gold fell 0.2%.
(END) Dow Jones Newswires
July 10, 2019 08:38 ET (12:38 GMT)
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