➤ U.S. futures flat amid U.S.-China trade skepticism.
➤ U.S. Treasury yield curve inverts.
➤ Italy's Democratic Party accepts 5-Star's demand to back departing Prime Minister Conte.
➤ Pound slumps on U.K. government plan to suspend Parliament.
U.S. equity futures struggled to gain traction and the U.S. Treasury curve inverted as trade uncertainty refueled markets' fear of an economic downturn. Meanwhile, the pound tumbled on the U.K. government's plans to suspend parliament.
As markets awaited an official trade update from the U.S. and China, some Chinese negotiators reportedly said they doubt a deal is possible before the 2020 U.S. elections, because any deal they sign with U.S. President Donald Trump may later be breached.
Futures on the S&P 500 index and the Nasdaq 100 both traded less than 0.1% higher at about 6.30 a.m. ET. The benchmark stock indexes closed 0.3% and 0.1% lower, respectively, on Aug. 27.
Trade skepticism restoked investors' fears of a possible U.S. recession as the Treasury yield curve inverted again. The yield on 10-year Treasurys stood at 1.47% and that on two-year notes was at 1.52%. Meanwhile, 30-year Treasury yields declined to an all-time low of 1.92%.
"Consumers can be fickle and sensitive to a sudden mood change if the trade war starts to cause the first cracks in the [U.S.] economy, while the loose fiscal policies of President Trump cannot continue indefinitely. These are major risks, which likely play a big role in the current yield curve inversion," analysts at the Monex Group wrote in a note.
In Asia, the Shanghai SE Composite fell 0.3% and Hong Kong's Hang Seng lost 0.2%.
Japan's Nikkei 225 ticked 0.1% higher and South Korea's KOSPI index rose 0.9% as Seoul summoned Japanese ambassador in retaliation against Tokyo's revocation of South Korea's status as a favored trading partner, which officially took effect Aug. 28.
In Europe, the FTSE 100 rose 0.2% as sterling weakened, France's CAC 40 shed 0.7% and Germany's DAX slid 0.8%.
Government bonds ralied across Europe, with Italian 10-year note yields falling 11 basis points to record-low 1.02% as Italy's Five-Star Movement and the Democratic Party continued discussions over a coalition formation to avoid a snap election after the Democratic Party agreed to the former's demand to back Giuseppe Conte as the prime minister. Elsewhere, the yield on 10-year German Bunds lost 2 basis points to negative 0.71%, also a record.
Sterling sank 0.7% to $1.2208 after earlier touching $1.2169, on reports that the U.K. government plans to suspend parliament for about five weeks, dramatically reducing the time available for MPs opposed to a no-deal Brexit to introduce legislation to block that eventuality. Parliament would reconvene on Sept. 3 but may stay only until Sept. 11 and return after a Queen's Speech, laying out the government's agenda on Oct. 14.
"This appears part and parcel of the ongoing battle between the various caucus of MPs who want to block a no-deal Brexit at all costs and those who want to retain the option as part of the ongoing attempts to renegotiate the withdrawal agreement," wrote Michael Hewson from CMC Markets, as he called the move "unconstitutional" and "undemocratic."
The euro was little changed at $1.1093 and the yen was flat at 105.75 per dollar. The Dollar Index, which measures the U.S. currency against a basket of developed-market peers, added 0.1% to 98.0980.
In commodities, Brent crude advanced 1.2% to $60.23 per barrel on the ICE Futures Exchange ahead of the U.S. EIA petroleum status report. Gold spot was little changed at $1,542.51 per ounce.
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The day ahead:
10 a.m. ET – U.S. state street investor confidence index
10:30 a.m. ET – U.S. EIA petroleum status report
11 a.m. ET – U.S. survey of business uncertainty
5:30 p.m. ET – U.S. Fed's Mary Daly speaks
