Futures Pointing To Sharply Lower Open On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Monday, with stocks likely to see further downside following the drop seen last week.

The downward momentum on Wall Street comes as traders look ahead to the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.

The Fed is widely expected to leave monetary policy unchanged but could address the outlook for its asset purchase program.

The minutes of the Fed’s last meeting signaled the central bank was prepared to begin scaling back asset purchases by the end of the year.

With some recent disappointing economic data suggesting the Fed could push back its plans, traders are likely to pay close attention to the wording of the post-meeting statement.

Following the narrowly mixed close seen on Thursday, stocks showed a notable move to the downside during trading on Friday. The major averages all slid firmly into negative territory after ending Thursday’s trading on opposite sides of the unchanged line.

The major averages moved roughly sideways in afternoon trading, ending the day firmly in the red. The Dow fell 166.44 points or 0.5 percent to 34,584.88, the Nasdaq slumped 137.96 points or 0.9 percent to 15,043.97 and the S&P 500 slid 40.76 points or 0.9 percent to 4,432.99.

With the drop on the day, the major averages all moved lower for the week. The Dow edged down by 0.1 percent, while the Nasdaq and the S&P 500 dropped 0.5 percent and 0.6 percent, respectively.

The weakness on Wall Street came as traders looked ahead to the Federal Reserve’s highly anticipated monetary policy meeting.

Stocks saw some further downside following the release of a report from the University of Michigan showing U.S. consumer sentiment rebounded less than expected in September.

The report said the consumer sentiment index inched up by 71.0 in September from 70.3 in August. Economists had expected the index to rise to 72.2.

The modest increase came after the consumer sentiment index tumbled to its lowest level since December of 2011 in the previous month.

“The steep August falloff in consumer sentiment ended in early September, but the small gain still meant that consumers expected the least favorable economic prospects in more than a decade,” said Surveys of Consumers chief economist, Richard Curtin.

Steel stocks saw substantial weakness on the day, dragging the NYSE Arca Steel Index down by 4 percent to its lowest closing level in five months.

U.S. Steel (X) led the way lower, plummeted by 8 percent after updating its third quarter guidance and announcing plans to spend about $3 billion to build a new mill.

Significant weakness was also visible among oil service stocks, as reflected by the 2.5 percent slump by the Philadelphia Oil Service Index. The weakness in the sector came amid a decrease by the price of crude oil.

Chemical stocks also saw considerable weakness on the day, resulting in a 1.9 percent drop by the S&P Chemical Sector Index. The index fell to a two-month closing low.

Tobacco, computer hardware, and semiconductor stocks also showed notable moves to the downside, moving lower along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are slumping $1.80 to $70.17 barrel after falling $0.64 to $71.97 a barrel last Friday. Meanwhile, after slipping $5.30 to $1,751.40 an ounce in the previous session, gold futures are rising $5.90 to $1,757.30 an ounce.

On the currency front, the U.S. dollar is trading at 109.53 yen versus the 109.93 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1711 compared to last Friday’s $1.1725.

Asia

Asian stocks fell in thin holiday trading on Monday, with markets in China, Japan, South Korea and Taiwan closed for holidays.

Trading in Japan will resume on Tuesday, while Taiwan and China will be back on Wednesday and South Korea returns on Thursday.

Hong Kong’s Hang Seng Index slumped 821.62 points, or 3.3 percent, to settle at 24,099.14. Property developer China Evergrande Group plummeted more than 10 percent ahead of its bond payments deadline later this week.

Agricultural Bank of China lost 4.1 percent after Reuters reported that China’s number three lender has made loan loss provisions on its exposure to beleaguered China Evergrande.

Australian markets tumbled as weak commodity prices pulled down miners and energy stocks. The benchmark S&P/ASX 200 Index tumbled 155.50 points, or 2.1 percent, to 7,248.20, a three-month low. The broader All Ordinaries Index ended down 165 points, or 2.1 percent, at 7,537.90.

BHP, Fortescue Metals Group and Rio Tinto all fell around 4 percent as iron ore prices plunged on reports that China is planning to expand air pollution curbs in Beijing and nearby provinces.

Energy stocks also ended broadly lower as oil extended last week’s losses on a stronger dollar. Woodside Petroleum, Origin Energy, Oil Search and Santos gave up 2-3 percent.

AusNet Services soared 19.2 percent after Brookfield Asset Management made a A$9.6bn (US$7bn) takeover offer for the Australian energy infrastructure firm.

New Zealand shares ended lower, with the benchmark NZX-50 Index dropping 55.97 points, or 0.4 percent, to 13,178.58 even as coronavirus curbs eased slightly in the largest city of Auckland.

Europe

European shares have fallen sharply to nearly two-month lows on Monday, with worries about slowing global growth, concerns over a potential spillover of the debt crisis at China Evergrande Group and the prospect of tighter monetary policy ng keeping investors nervous.

In economic news, German producer price inflation rose to 12 percent in August from 10.4 percent in July, Destatis reported. This was the biggest growth since December 1974, when prices were up 12.4 percent amid the first oil crisis.

Traders are bracing for the U.S. Federal Reserve’s policy meeting on Tuesday and Wednesday, where the central bank is expected to lay the groundwork for a tapering asset purchases.

While the U.K.’s FTSE 100 Index has plummeted by 1.9 percent, the French CAC 40 Index and the German DAX Index are down by 2.7 percent and 2.9 percent, respectively.

Insurer Prudential has plunged after it announced a share offer to raise up to 5 percent of its issued share capital on the Hong Kong Stock Exchange through a concurrent Hong Kong public offer and international placing.

Daimler AG has also declined. Media reports quoted the chief of its truck division as saying the unit had seen the supply of crucial chips tighten further in recent weeks.

Automotive and industrial supplier Schaeffler AG has also tumbled after opening a new production facility at its Szombathely location in the west of Hungary.

Alstom shares have also fallen in Paris as a diplomatic spat between France and Australia over a cancelled submarine deal rages.

On the other hand, AstraZeneca has rallied. The pharmaceutical giant said that its cancer treatment Enhertu reduced the risk of disease progression or death by 72 percent in patients with HER2-positive metastatic breast cancer.

Software company ZOO Digital Group has also moved to the upside after issuing a trading update for the first half year.

Airline Lufthansa has also advanced as it announced a capital increase to repay part of a government bailout.

U.S. Economic Reports

The National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of September at 10 am ET. The housing market index is expected to come in unchanged at 75.