➤ U.S. stock rout spills over to European and Asian equities.
➤ Treasury yields stable, gold gains.
➤ Dollar loses its steam, sterling steadies amid Brexit hopes.
➤ Brent crude oil falls below $82 per barrel.
Wall Street is set to open lower, extending yesterday's stock rout that spilled over to Asian and European markets.
The Shanghai SE Composite index tumbled 5.22% to levels last seen in late 2014, while Japan's Nikkei 225 shed 3.89% and Hong Kong's Hang Seng dropped 3.54%, with Tencent Holdings Ltd. closing 6.77% lower, following overnight losses in the U.S. The tech-heavy Nasdaq Composite plunged 4.08%, while the S&P 500 closed 3.29% lower yesterday. Shares in Apple Inc., Facebook Inc. and Alphabet Inc. all fell more than 4%.
"U.S. equities [might be] finally succumbing to bad news, while there's probably a degree of profit-taking ahead of the onset of the [third-quarter] earnings season amid elevated valuations," TD Securities said in a note.
In Europe, the FTSE 100 fell 1.89% as of 6:44 a.m. ET, France's CAC 40 was down 1.83% and Germany's DAX index lost 1.63%. Italy's FTSE MIB index also declined 1.52%.
The retreat in global stocks comes on the back of rising trade tensions and as investors see that the expected slowdown in global economic growth "is likely to trickle down into potentially lower profit margins at a time when central banks, particularly the Federal Reserve, are looking to normalize policy to prevent overheating a U.S. economy getting a bump from a significant fiscal boost," wrote Michael Hewson, chief market analyst at CMC Markets UK.
U.S. President Donald Trump renewed his criticism of the Fed as stocks dropped, saying the central bank has "gone crazy" with monetary policy tightening. Meanwhile, 10-year Treasurys stood at 3.18%, while gold futures gained 1.27% to $1,208.50 per ounce.
German Bunds rose as 10-year yields shed 3 basis points to 0.523%. Italian government bonds stayed under pressure, with yields climbing 11 basis points to 3.61%, as Italian Deputy Prime Minister Matteo Salvini said the 10-year spread between the bonds and Bunds will not touch 400 basis points.
The dollar lost its steam amid the stock market rout, with the spot index down 0.38% at $95.147. The euro strengthened 0.44% against the dollar, while the Japanese yen was broadly stable. Sterling steadied at $1.32 after rising yesterday, following comments from the European Union's Brexit negotiator, Michel Barnier, that a divorce deal between the EU and the U.K. were "within reach."
Brent crude oil lost 2.30% to $81.18 per barrel on the ICE Futures Exchange, amid reports that India and some other countries are planning to purchase oil from Saudi Arabia in what is seen as a short-term solution to looming U.S. sanctions on Iran. Investors will also monitor the U.S. Energy Information Administration's weekly petroleum status report later today, after the agency boosted its expectations for U.S. crude oil production into 2019.
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The day ahead:
8:30 a.m. ET — U.S. CPI (Econoday consensus: 0.2% monthly, 2.4% yearly)
8:30 a.m. ET — U.S. jobless claims (Econoday consensus: 207,000)
10:30 a.m. ET — U.S. EIA natural gas report
11 a.m. ET — U.S. EIA petroleum status report
2 p.m. ET — U.S. Treasury budget (Econoday consensus: $62.0 billion)
4:30 p.m. ET — U.S. Fed balance sheet and money supply