Morning Call: Trade tensions weigh on global stocks; Sep E-mini S&Ps down -0.63%; July COMEX copper down -0.17% at a 2-1/2 month low on demand concerns.
Barchart.com - Mon Jun 25, 6:41AM CDT
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 ESU18 - S&P 500 E-Mini
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Overnight Markets and News

Sep E-mini S&Ps (ESU18 -0.55%) this morning are down -0.63% and European stocks are down -1/06%. Global equity markets are falling as the prospects for global trade show few signs of improving. According to people familiar with the plan, Treasury Secretary Mnuchin is said to suggest a plan to heighten scrutiny of Chinese investments in sensitive U.S. industries under an emergency law. Under the Committee on Foreign Investments or CFIUS, the Treasury could declare China's investments in U.S. companies involved in technologies such as new-energy vehicles, robotics and aerospace a threat to economic and national security. Metals producers and mining stocks are also weaker after July COMEX copper (HGN18 -0.17%) fell -0.17% to a 2-1/2 month low on concern global trade tensions will reduce demand for industrial metals. European stocks were also under pressure after the German Jun IFO business climate fell -0.5 to a 15-month low of 101.08. Asian stocks settled lower: Japan -0.79%, Hong Kong -1.29%, China -1.05%, Taiwan -1.04%, Australia -0.24%, Singapore -0.81%, South Korea -0.11%, India -0.61%. Chinese stocks closed lower despite the action by the PBOC to reduce banks’ reserve requirements by 50 bp to 15.50% from 16.00%. However, the yuan sank to a 5-3/4 month low of 6.5433 against the dollar on the PBOC's action. Japanese stocks declined as exporters sold off after USD/JPY fell to a 2-week low, which reduces exporters' earnings prospects.

The dollar index (DXY00 -0.13%) is up +0.01%. EUR/USD (^EURUSD +0.27%) is up +0.20%. USD/JPY (^USDJPY -0.34%) is down -0.34% at a 2-week low.

Sep 10-year T-note prices (ZNU18 +0-040) are up +6.5 ticks.

ECB Chief Economist Praet said the ECB expressed at its latest meeting "an anticipation that net asset purchases would end at the end of the year. We didn’t say we were now deciding to stop the program in December." He also said that interest rates will remain at current levels "as long as necessary to ensure that inflation developments remain in line with current expectations of a sustained adjustment path."

The German Jun IFO business climate fell -0.5 to a 15-month low of 101.08, right on expectations.

U.S. Stock Preview

Key U.S. news today includes: (1) May Chicago Fed national activity index (expected -0.04 to 0.30, Apr +0.02 to 0.34), (2) May new home sales (expected +0.8% to 667,000, Apr -1.5% to 662,000), (3) Jun Dallas Fed manufacturing activity index (expected -3.8 to 23.0, May +5.0 to 26.8), (4) USDA weekly grain export inspections, (5) USDA weekly Crop Progress.

Notable Russell 1000 earnings reports today include: Carnival (consensus $0.59).

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

Equity conferences this week: American Diabetes Association Meeting on Mon, Crane's Money Fund Symposium on Mon-Tue, BMO Chemicals Conference on Tue, JMP Securities Boston Real Estate Forum on Thu, Berenberg Blockchain Conference on Thu, GSMA Mobile World Congress Shanghai on Fri.

Market Comments

Sep S&P 500 E-minis (ESU18 -0.55%) this morning are down -17.25 points (-0.63%). Friday's closes: S&P 500 +0.19%, Dow Jones +0.49%, Nasdaq 100 -0.28%. The S&P 500 on Friday closed higher on carry-over support from a rally in European stocks after the Eurozone Jun Markit composite PMI unexpectedly rose +0.7 to 54.8, stronger than expectations of -0.2 to 53.9. There was also strength in energy stocks as crude oil prices rallied sharply by +4.64%. Stocks were undercut by the -1.8 point decline in the U.S. Jun Markit manufacturing PMI to a 7-month low of 54.6 (weaker than expectations of -0.3 to 56.1) and by heightened trade war concerns after President Trump threatened to impose a 20% tariff on EU car exports unless the EU "soon" removes import duties and other barriers on U.S. goods.

Sep 10-year T-notes (ZNU18 +0-040) this morning are up +6.5 ticks. Friday's closes: TYU8 -1.00, FVU8 -1.00. Sep 10-year T-notes on Friday closed lower on trade tensions after President Trump threatened to slap a 20% tariff on imported European vehicles. T-note prices were also undercut by the rally in stocks that curbed the safe-haven demand for T-notes and by the sharp rally in energy prices, which boosted inflation expectations. T-notes were supported by economic concerns after the U.S. Jun Markit manufacturing PMI fell -1.8 to a 7-month low of 54.6.

The dollar index (DXY00 -0.13%) this morning is up +0.011 (+0.01%), EUR/USD (^EURUSD +0.27%) is up +0.0023 (+0.20%) and USD/JPY (^USDJPY -0.34%) is down -0.37 (-0.34%) at a 2-week low. Friday's closes: Dollar Index -0.226 (-0.24%), EUR/USD +0.0047 (+0.41%), USD/JPY -0.02 (-0.02%). The dollar index on Friday fell to a 1-week low and closed lower on the slide in the U.S. Jun Markit manufacturing PMI to a 7-month low. There was also strength in EUR/USD which rose to a 1-week high after the Eurozone Jun Markit composite PMI unexpectedly rose +0.7 to 54.8, stronger than expectations of -0.2 to 53.9.

Metals this morning are weaker with Aug gold (GCQ18 -0.02%) -1.3 (-0.10%), July silver (SIN18 -0.30%) -0.069 (-0.42%), and July copper (HGN18 -0.17%) -0.005 (-0.17%) at a 2-1/2 month low. Friday's closes: Aug gold +0.20 (+0.02%), Jul silver +0.133 (+0.81%), Jul copper +0.55 (+0.18%). Metals on Friday settled mixed with Jul copper at a 3-week low. Metals prices were supported by the fall in the dollar index to a 1-week low and by increased safe-haven demand for precious metals on concern that global trade tensions will undercut economic growth.

Aug WTI crude oil prices (CLQ18 +0.23%) this morning are down -11 cents (-0.16%) and Aug gasoline (RBQ18 -1.16%) is -0.0292 (-1.42%). Friday's closes: Aug crude +3.04 (+4.64%), Aug gasoline +5.79 (+2.90). Aug crude oil and gasoline on Friday moved sharply higher with Aug crude at a 1-month high. Crude oil prices were bosted by the slide in the dollar index to a 1-week low and the OPEC+ deal to boost crude production by a nominal +1.0 million bpd starting next month, which in reality will be only 700,000 bpd since most members will be unable to increase their output. The agreement was less than Russia's proposal for a +1.5 million bpd increase.

Overnight U.S. Stock Movers

Kroger (KR +3.34%) was downgraded to 'Hold' from 'Buy' at Pivotal Research Group LLC on valuation.

Intel (INTC +0.59%) was downgraded to 'Neutral' from 'Buy' at Nomura Instinet.

O'Reilly Automotive (ORLY -0.32%) was downgraded to 'Neutral' from 'Buy' at MoffetNathanson.

Veeva (VEEV -0.86%) was rated a new 'Buy' at SunTrust Robinson Humphrey with a price target of $100.

Twilio (TWLO -3.00%) was rated a new 'Buy' at Piper Jaffray with a price target of $70.

Estee Lauder (EL +0.70%) was downgraded to 'Equal Weight' from 'Overweight' at Morgan Stanley.

First Solar (FSLR +0.65%) was upgraded to 'Buy' from 'Neutral' at Bank of America/Merrill Lynch with a price target of $63.

BorgWarner (BWA -1.85%) was upgraded to 'Buy' from 'Neutral' at Goldman Sachs with a price target of $58.

Lockheed Martin (LMT -0.33%) was awarded a $1.12 billion fixed-price-incentive-firm contract from the U.S. Department of Defense for the production of 16 F-16 Block 70 aircraft.

Nicaragua's long-term foreign currency issuer default rating was downgraded to 'B' from 'B+' with a negative outlook by Fitch ratings, reflecting increasing political instability and the corresponding deterioration of Nicaragua's investment, economic growth and public finance outlook.

Achaogen (AKAO -0.24%) rose nearly 4% in after-hours trading on speculation the FDA on Monday will approve the company's antibiotic plazomicin for urinary tract infections.