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Research Market strategy
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Daily Market Brief

US Index Futures Confirm Bearishness, Oil Tumbles to July Levels


US Index Futures Confirm Bearishness, Oil Tumbles to July Levels

By Strategy Desk

US futures continue to flash red in early trading on Monday, as equities are faced with a valiant attempt to recoup the losses of last week. They say September is the worst month of the year for the US stock market, and it seems this one is no exception, with Nasdaq tumbling about 5% in a single day last week. The unexpected bearishness comes after the best August in over three decades for the S&P 500 and Dow Jones.

After countless record-updating sessions, the US stock market needed some kind of correction, but analysts cannot figure out the fundamentals behind the recent slump.

What’s even worse for the equities, the current week isn’t foretelling anything good, with Nasdaq futures declining by 1.17% for the day at the time of writing. US stock trading is closed today due to Labor Day.

On Friday, the US reported nonfarm payrolls figures that prompted cautious optimism that the economy is gradually recovering. The American labor market added 1,371 million nonfarm jobs last month, in line with expectations. The unemployment rate fell more than expected, to 8.4% from 10.2% in July. The great performance could have caused the Fed to reconsider its unlimited free cash rhetoric, but it seems that the central bank has already made its decision to keep interest rates close to zero for years to come in order to mitigate any potential risks.

Asian equities have already started the trading week, and are mixed at the time of writing. The markets are trying to reverse the biggest two-day decline since June.

China’s Shanghai Composite is down 0.62%, and the Shenzhen Component has dropped 1.01%. The world’s second-largest economy has just released mixed import and export data for last month, with the latter surging 9.5% y/y from July 7.2% ascension. However, imports fell 2.1% y/y after July’s 1.4% decline. Accordingly, the trade balance fell to $58.93 billion, down from July’s $62.33 billion.

Japan’s Nikkei 225 is down 0.42%, ahead of a series of important data due tomorrow, including the GDP performance for the second quarter, current account, and household spending. Investors expect Shinzo Abe’s policy of aggressive stimulus to be continued by Yoshihide Suga, who is expected to replace the prime minister.

Hong Kong’s Hang Seng Index has edged up 0.16%, recovering earlier losses. South Korea’s KOSPI has increased by 0.65%.

Australia’s ASX 200 is up 0.32% after initial losses. Australian biotech firm CSL said earlier Monday that it would produce the COVID-19 vaccine developed by AstraZeneca and Oxford University when the trials succeed. Australians may receive the first doses by early 2021.

European stocks will be mixed on Monday, as DAX futures are in red while British FTSE and French CAC 40 futures are bullish.

In individual corporate news, Tesla stock fell over 6% in after-hours trading on Friday after the S&P 500 added three companies but bypassed the electric vehicle maker, even though it reported four straight positive quarters and was widely expected to make it to the benchmark index. The S&P 500 added Etsy, Teradyne and Catalent.

In the commodity market, gold is slightly increasing amid mixed import and export data from China. Also, despite the positive nonfarm payrolls report, the US economic data was mixed last week, prompting fears that the recovery might not be as sustainable as expected. The metal is now up 0.12%, to $1,936.55.

Oil prices are tumbling to the lowest since the beginning of July as Saudi Arabia made major price cuts for crude supply to Asia. Meanwhile, optimism about a recovery in oil demand is fading. WTI is down 1.89% to about $39, and Brent has declined by 1.55% to $42.

In FX, the US dollar has recovered some previous losses thanks to the US nonfarm payrolls report. The massive decline in oil prices is also benefiting the greenback, whose bullishness is capped by the US stock market slump. The USD Index is up 0.27%, while EUR/USD is down 0.08% to 1.1827.

The pound is declining amid post-Brexit pessimism, as the UK and the EU still cannot reach consensus for a trade deal ahead of the last round of negotiations set for October. GBP/USD is down 0.57%.

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