Wednesday January 10th

10-01-2018

Dow futures drop more than 100 points on concern China may stop buying US debt

U.S. stocks futures fell on Wednesday as concern grew that China may stop buying U.S. sovereign bonds. Dow Jones industrial average futures fell 120 points, while S&P 500 and Nasdaq 100 futures declined 12 points and 41.25 points, respectively. Bloomberg News reported Wednesday, citing people familiar with the matter, that officials in Beijing have recommended the Chinese government lowers — or even stops — its buying of U.S. sovereign debt. The report also notes that Chinese officials think U.S. debt is becoming less attractive compared to other assets, adding that trade tensions between the two countries could provide a reason to slow down or halt the purchases. Gold futures were higher by 0.7 percent at $1,323.10 per ounce, while the U.S. dollar dropped 0.6 percent against a basket of currencies. In the previous trading day, U.S. equities hit record highs, as optimism remained high ahead of the corporate earnings season. Markets have been outperforming as of late, after President Donald Trump signed a bill in December to cut the corporate tax rate from 35 percent to 21 percent. On Wednesday, markets worldwide seemed to be pulling back from recent highs, as investors take note of the current market environment. Concerns have also been emanating for the bond markets as the benchmark 10-year U.S. Treasury yield rose to its highest level since March on Tuesday, surpassing 2.5 percent. Many well-known investors have warned that this could be signalling a new era for fixed income. Bond guru Bill Gross said Tuesday that the bond bear market is finally upon us after more than 25 years. Investors will be awaiting the latest remarks by key Fed members, as a number of officials are set to speak. In Illinois, Chicago Fed President Charles Evans will be present at the Lake Forest-Lake Bluff Rotary Club Foundation's 2018 economic breakfast. On Wednesday, Trump is set to meet Erna Solberg, the Norwegian prime minister at the White House. During the meeting, the two leaders are expected to talk about bilateral ties, security, and economic prosperity. Major Asian markets closed mostly lower on Wednesday despite a solid lead from Wall Street overnight, but Hong Kong stocks bucked the trend and closed higher for a 12th straight day. In Japan, the Nikkei 225 declined 0.26 percent, or 61.79 points, to close at 23,788.2, despite broad gains across auto stocks and financial plays. Over in Seoul, the benchmark Kospi index edged down 0.42 percent to end at 2,499.75. Hong Kong's Hang Seng index rose 0.2 percent to close at 31,073.72, its 12th straight session of gains. The index was also less than 900 points away from its all-time high of 31,958.41, which was set in 2007. The Shanghai composite ended the session higher by 0.24 percent at 3,422.14. Meanwhile, the Shenzhen composite traded down 0.33 percent to end at 1,945.66. Crude oil prices hit new multi-year highs on Wednesday as OPEC-led production cuts and healthy demand helped to balance the market, but analysts warned of possible overheating. A broad, global market rally, including stocks, has also been fueling investment into crude oil futures. U.S. West Texas Intermediate (WTI) crude futures were up 50 cents, or 0.8 percent, at $63.46 a barrel, by 9:07 a.m. ET (1407 GMT). The contract rose earlier to $63.67, highest since Dec. 9, 2014. Brent crude futures rose 37 cents to $69.19 a barrel. Brent earlier hit $69.37, the highest since May 2015.