The U.S. Market Resumes Free-Fall, Treasury Rates Crash, PBOC Sets Yuan Rate Lower Than Expected

The U.S. futures fall as Treasury rates crash, the market has entered correction and momentum is building.
Thomas Hughes

The U.S. Futures Are In Free-Fall In Early Trading

The U.S. futures are in free-fall as rates on Treasuries crash. The flight into the safe-haven U.S. bonds is another indication the market fears an economic recession. The move was sparked by the PBOC’s decision to lower the yuan’s midpoint, a move seen by the market as warning China could devalue its currency to fight the effects of the trade war. The Dow Jones Industrial Average had been down about -0.40% but doubled that loss by 9 AM. The S&P 500 and NASDAQ Composite are also moving lower with losses in the range of -0.45% to -0.55%.

Disney dominated stock news after it reported weaker than expected results. The company reports revenue grew 33% from the same period last year but missed consensus by a fair margin. EPS also came in well below consensus after weakness in dog-segments ESPN and Hulu. Shares of CVS were up more than 6% after the consumer health giant reported better than expected results. The company also narrowed guidance to a range near the upper end of previous guidance.

European Markets Are Up At Midday

The European indices are broadly higher at midday as cautious traders nibble at cheap stocks. The CAC and DAX were both up about 0.80% despite weak industrial production figures in Germany but weakened after the U.S. markets fell. The FTSE is up about half that. In Germany, industrial output fell -1.5% versus the expected -0.40% and highlights a sharp contraction occurring within the EU. The good news is the data helps ensure the ECB will vigorously stimulate the economy when it meets next.

The banks were among the weakest sectors despite generally positive trading conditions. A raft of weak earnings reports has the sector at a 1-year low. Commerzbank beat top and bottom-line consensus estimates but gave a weak forward outlook, shares of its stock fell -5.0%. ABN Amro beat its consensus but says costs cut into profit and will impact future results, its shares fell -4.4%. Unicredit says its EPS rose sharply from the previous year but fell short of expectations, its shares fell -3.0%.

Markets In Asia Are Mixed On Wednesday

Asian markets closed mixed after Wednesday’s session. The move by the PBOC and escalating tensions between China and the U.S. have traders on edge. The Nikkei, Shanghai Composite and Kospi all fell -0.30 to -0.45% while the Hang Seng and ASX posted gains. The ASX led with an advance of 0.64%, the Hang Seng gained a mere 0.08%.

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