Tuesday January 7th

7-01-2020

Stock futures point to a flat open as investors weigh growing geopolitical risk

U.S. stock index futures indicated a flat open on Tuesday as Wall Street assessed the growing geopolitical risks stemming from U.S.-Iran tensions. Around 7:20 a.m. ET, Dow Jones Industrial Average pointed to a loss of just 9 points to start off the session. S&P 500 and Nasdaq 100 futures also pointed to a muted start. President Donald Trump announced last week that the U.S. had killed Iran’s top military commander in Baghdad, Gen. Qasem Soleimani. The president also said Sunday that he could slap sanctions on Iraq, after its parliament passed a resolution calling for the government to expel foreign troops from the country. However, U.S. equities rose on Monday, reversing earlier losses and recovering some of Friday’s steep decline. Market players are now waiting to see if the situation will escalate with a potential retaliation from Iranian forces. “investors starting on Monday began to downplay the importance of Soleimani and that sentiment carried over to int’l markets on Tuesday,” said Adam Crisafulli, founder of Vital Knowledge, in a note. “Investors aren’t oblivious to rising Middle Eastern tensions, but they’re placing Soleimani in the same category as the recent Iranian strikes against Saudi oil assets (a risk, but not only immediately fatal to the present equity narrative).” Crude prices, which rose after last week’s attack amid concerns over possible disruptions to the global oil supply, fell 0.7% to $62.84 per barrel. In terms of data, there will be U.S. trade deficit figures out at 8:30 a.m. ET, followed by factory orders and non-manufacturing PMIs at 10 a.m. Asian markets jumped on Tuesday while oil and gold prices pared losses amid rising geopolitical concerns in the Middle East. Japan’s Nikkei 225 jumped 1.60% to close at 23,575.72 of Tuesday, after a decline of nearly 2% a day earlier. The Topix index rose 1.62%. South Korea’s Kospi was up 0.95% to close at 2,175.54. Chinese stocks were also in positive territory. The Shanghai composite rose 0.69% to 3,104.80, while the Shenzhen composite jumped 1.31% to 1,791.85. The Shenzhen component surged 1.22% to 10,829.04. Hong Kong’s Hang Seng index rose 0.34% in its final hour of trade. Gold prices retreated on Tuesday from near seven-year highs reached in the previous session as investors took profits in the absence of new developments in the tense situation between the United States and Iran. Palladium, meanwhile, hit another record peak on the back of prolonged supply constraints in the market. Spot gold was steady at $1,566.56 per ounce, having fallen as much as 0.7% earlier in the session. U.S. gold futures were also steady at $1,568.30.