Monday August 31st

31-08-2015

Street set for lower opening wih China still in focus

U.S. stock index futures pointed to a lower open on Monday, as European and Asian stocks traded mostly lower on concerns that Beijing might change tack in its efforts to boost the stock market. Futures for the Dow Jones industrial average fell by more than 200 points at one stage, after a report in The Financial Times over the weekend that Beijing would abandon its large-scale share purchases. This sparked declines in China's A-listed shares, although the Shanghai Composite pared losses to close 0.8 percent down. Risk sentiment was also hit by comments from Federal Vice Chairman Stanley Fischer regarding the likelihood of a U.S. interest rate hike in September. Fischer told CNBC on Friday from the Jackson Hole symposium that it was too early to determine whether last week's market turmoil would impact the likelihood of a rate hike next month. Fischer added in a Saturday speech that inflation pressure in the U.S. economy is likely to rebound and allow for a gradual increase in rates. He and the Bank of England's Governor Mark Carney indicated with their comments that the two central banks could be set to look past recent financial market turmoil set off by fears of slowing China growth. Analysts at Barclays said Fischer's comments increased the probability of a rate hike taking place later than September. "Although we continue to view economic activity in the U.S. as solid, justifying modest rate hikes, we believe the Federal Reserve is unlikely to begin a hiking cycle in this environment for fear of destabilizing markets further," Michael Gapen and Rob Martin, two analysts at the bank, said in a research note circulated on Monday. European stocks largely opened lower on Monday, but the London Stock Exchange was shut for a bank holiday in the U.K. No major earnings are due on Wall Street on Monday and the only big data watch is the Chicago purchasing managers' index (PMI) for August, due at 9:45 a.m. ET. Asian equities closed mostly lower on Monday, with the Shanghai Composite significantly paring losses amid talk that Beijing will halt its controversial market intervention. Nikkei 1.3% lower. Japan's benchmark index ended below the 19,000 level, retreating from a one-week closing high hit on Friday, after weak July industrial production figures. Released before the Tokyo market open, the report showed a monthly fall of 0.6 percent, missing expectations for a 0.1 percent rise and coming in well below June's revised 1.1 percent gain. Oil fell below $49 a barrel on Monday after its biggest two-day rally in six years last week, pressured by a supply glut and renewed concern about a hard landing for China's economy. International benchmark Brent crude climbed 10 percent last week but was still heading for its fourth straight monthly decline and has risen in only two of the past 14 months. Brent was down $1.46 at $48.59 a barrel by 8:35 a.m. (1235 GMT). U.S. crude, which had rallied 12 percent last week, dropped $1.22 to $44. Gold eased on Monday, extending last week's slide, as indications that the Federal Reserve may still raise interest rates this year despite recent market turmoil offset a retreat in the dollar. Spot gold was down 0.4 percent at $1,128.01 an ounce, while U.S. gold futures for December delivery were down $6.40 an ounce at $1,127.60. The metal fell 2.3 percent last week as a sell-off in Chinese equities rattled wider markets.