Morning Call: Trade tensions weigh on global stocks; Sep E-mini S&Ps down -0.53%; China's Shanghai Composite closes down -2.52% at a 2-1/3 year low.
Barchart.com - Mon Jul 02, 6:53AM CDT
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Overnight Markets and News

Sep E-mini S&Ps (ESU18 -0.52%) this morning are down -0.53% and European stocks are down -0.57% as trade risks drag global equity markets lower. Sep COMEX copper (HGU18 -0.39%) is down -0.51% to a 9-1/4 month low, which undercut mining stocks and metals producers on concern trade tensions are beginning to slow global manufacturing activity. The Eurozone Jun Markit manufacturing PMI was revised downward to a 1-1/2 year low of 54.9 and the China Jun manufacturing PMI fell -0.4 to 51.5, weaker than expectations of -0.3 to 51.6. Asian stocks settled lower: Japan -2.21%, Hong Kong closed for holiday, China -2.51%, Taiwan -0.54%, Australia -0.27%, Singapore -0.91%, South Korea -2.25%, India -0.45%. China's Shanghai Composite tumbled to a 2-1/3 year low and the Chinese yuan fell to a 9-month low of 6.632 per dollar as increased risks of a trade war with the U.S. and weaker-than-expected China Jun manufacturing data hammered Chinese stocks and the yuan. Japan's Nikkei Stock Index fell to a 2-1/2 month low after Japan's Q2 Tankan showed confidence among large manufacturers declined more than expected.

The dollar index (DXY00 +0.22%) is up +0.33%. EUR/USD (^EURUSD -0.41%) is down -0.39% weaker on heightened political risks in Germany as Chancellor Merkel's Christian Democratic party may lose its parliamentary majority due to a standoff on migration policies. The Interior Minister of the Bavarian Christian Social Union has threatened to resign from Merkel's cabinet if no compromise is found on migration policy today. USD/JPY (^USDJPY +0.09%) is down -0.01%.

Sep 10-year T-note prices (ZNU18 +0-045) are up +5 ticks.

The Eurozone Jun Markit manufacturing PMI was revised downward to 54.9 from the previously reported 55.0, the slowest pace of expansion in 1-1/2 years.

The Eurozone May unemployment rate was unchanged at an 8-1/3 year low of 8.4%, better than expectations of no change at 8.5%.

The China Jun manufacturing PMI fell -0.4 to 51.5, weaker than expectations of -0.3 to 51.6. The Jun non-manufacturing PMI unexpectedly rose +0.1 to a 5-month high of 55.0, stronger than expectations of -0.1 to 54.8.

The Japan Q2 Tankan large manufacturing business conditions fell -3 to 21, weaker than expectations of -2 to 22.

U.S. Stock Preview

Key U.S. news today includes: (1) revised Jun Markit manufacturing PMI (prelim-Jun -1.8 to 54.6), (2) May construction spending (expected +0.4%, Apr +1.8%), (3) Jun ISM manufacturing index (expected -0.5 to 58.2, May +1.4 to 68.7), (4) USDA weekly grain export inspections, and (5) USDA weekly Crop Progress.

Notable Russell 1000 earnings reports today include: none ($0.00).

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

Equity conferences this week: none.

Market Comments

Sep S&P 500 E-minis (ESU18 -0.52%) this morning are down -14.50 points (-0.53%). Friday's closes: S&P 500 +0.08%, Dow Jones +0.23%, Nasdaq 100 +0.13%. The S&P 500 on Friday closed higher after U.S. May personal income rose +0.4% as expected, and after the U.S. Jun Chicago PMI unexpectedly rose +1.4 to a 5-month high of 64.1, stronger than expectations of -2.7 to 60.0. Also, strength in energy stocks was supportive for the overall market after Aug WTI crude rose +0.95% to a new 3-1/2 year high. On the negative side, U.S. May personal spending rose +0.2%, weaker than expectations of +0.4%, and the University of Michigan U.S. Jun consumer sentiment fell -1.1 to 98,2, weaker than expectations of -0.3 to 99.0.

Sep 10-year T-notes (ZNU18 +0-045) this morning are up +5 ticks. Friday's closes: TYU8 unch, FVU8 -0.75. Sep T-notes on Friday settled little changed. Supportive factors were positive carry-over from a rally in German bunds to a 1-month high, and the weaker-than-expected U.S. economic data on May personal spending and Jun University of Michigan consumer sentiment. On the negative side was the +2.0% y/y increase in the U.S. May core PCE deflator, stronger than expectations of +1.9% y/y and the fastest pace of increase in 6-years, which is hawkish for Fed policy.

The dollar index (DXY00 +0.22%) this morning is up +0.315 (+0.33%), EUR/USD (^EURUSD -0.41%) is down -0.0046 (-0.39%) and USD/JPY (^USDJPY +0.09%) is down -0.01 (-0.01%). Friday's closes: Dollar Index -0.750 (-0.79%), EUR/USD +0.0115 (+0.99%), USD/JPY +0.27 (+0.24%). The dollar index on Friday closed lower after EUR/USD rallied when Eurozone Jun CPI rose +2.0% y/y, the biggest increase in 5-1/2 years, which is hawkish for ECB policy. The dollar also fell back after U.S. May personal spending rose less than expected, which is dovish for Fed policy.

Metals this morning are weaker with Aug gold (GCQ18 -0.33%) -4.0 (-0.32%), Sep silver (SIU18 -1.19%) -0.178 (-1.10%) at a 6-1/2 month low, and Sep copper (HGU18 -0.39%) -0.015 (-0.61%) at a 9-1/4 month low. Friday's closes: Aug gold +3.50 (+0.28%), Sep silver +0.157 (+0.98%), Sep copper -0.055 (-0.19%). Metals on Friday settles mixed as a weaker dollar supported gains as did the -3,725 MT decline in LME copper inventories to a 2-week low of 294,525 MT. The main bearish factor for metals remains the ongoing trade tensions that threaten to derail the global economy and demand for industrial metals.

Aug WTI crude oil prices (CLQ18 -0.13%) this morning are down -7 cents (-0.09%) and Aug gasoline (RBQ18 -0.72%) is -0.0162 (-0.75%). Friday's closes: Aug crude +0.70 (+0.95%), Aug gasoline +4.57 (+2.17%). Aug crude on Friday rallied to a 3-1/2 year high and Aug gasoline climbed to a 1-month high as the dollar weakened. Also, fund buying in the energy complex continued on the prospects for tighter global oil supplies with supply disruptions in Canada and Libya along with the re-imposition of U.S. sanctions on Iran, which may curb Iranian oil exports.

Overnight U.S. Stock Movers

Paccar (PCAR -0.13%) was downgraded to 'Underperform' from 'Neutral' at Baird with a price target of $56

Nordstrom (JWN -1.15%) was downgraded to 'Market Perform' from 'Outperform' at Cowen.

Capital One Financial (COF -0.59%) was upgraded to 'Outperform' from 'Neutral' at Credit Suisse with a price target of $120.

Pinnacle Foods (PF -0.20%) was downgraded to 'Hold' from 'Buy' at Stifel.

Walgreens Boots Alliance (WAG) was downgraded to 'Neutral' from 'Buy' at Mizuho Securities USA.

Tesla (TSLA -1.99%) is up more than 4% in pre-market trading after CEO Musk said his company achieved its production goal of 5,050 Model 3 vehicles built in the past week and it is on track to build as many as 6,000 Model 3's a week by 'next month.'

Core Laboratories NV (CLB +0.60%) may open to the downside this morning after it cut its Q2 revenue estimate to $174 million-$175 million from a prior view of $177 million-$179 million, citing delays of international field development activity.

Bandwidth (BAND unch) was downgraded to 'Equal-Weight' from 'Overweight' at Morgan Stanley.

Wells Fargo (WFC +3.37%) was upgraded to 'Equal-Weight' from 'Underweight' at Morgan Stanley with a price target of $62.

Howard Hughes (HHC +0.84%) was rated a new 'Buy' at Jeffries with a price target of $170.

Boardwalk Pipeline Partners (BWP -0.68%) rose nearly 3% in after-hours trading after Boardwalk GP, a Loews subsidiary, said it will exercise its option to buy the units it doesn’t already own for $12.06 a unit, or $1.5 billion in total.