Futures Pointing To Continued Weakness On Wall Street

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

Concerns about the outlook for interest rates may continue to weigh on Wall Street following last week’s Federal Reserve meeting.

The Fed left interest rates unchanged as widely expected but forecast another rate hike before the end of the year as well as keeping rates at elevated levels for longer than previously anticipated.

CME Group’s Fed Watch Tool is currently indicating a 79.7 percent chance the Fed will leave interest rates unchanged at its next meeting in late October/early November and just a 20.3 percent chance of a quarter point rate hike.

Meanwhile, the Fed Watch Tool is indicating a 59.3 percent chance the Fed will leave rates unchanged at its December meeting and a 35.5 percent chance the central bank will raise rates by a quarter point.

Overall trading activity may be somewhat subdued, however, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

Later in the week, the Commerce Department is due to release its report on personal income and spending in the month of August, which includes readings on inflation said to be preferred by the Fed.

Reports on consumer confidence, new home sales and durable goods orders may also attract attention in the coming days.

After an early move to the upside, stocks saw substantial volatility in the latter part of the trading session on Friday. The major averages showed wild swings back and forth across the unchanged line before eventually ending the day modestly lower.

The tech-heavy Nasdaq edged down 12.18 points or 0.1 percent 13,211.81, its lowest closing level in over three months. The S&P 500 also dipped 9.94 points or 0.2 percent to a three-month closing low of 4,320.06, while the Dow fell 106.58 points or 0.3 percent to a two-month closing low of 33,963.84.

Largely reflecting the sell-off seen on Wednesday and Thursday, the Nasdaq showed a 3.6 percent nosedive for the week. The S&P 500 also plunged by 2.9 percent, while the Dow tumbled by 1.9 percent.

The early strength on Wall Street partly reflected bargain hunting, with traders picking up stocks at reduced levels following the sell-off seen over the two previous sessions.

Buying interest waned over the course of the session, however, as concerns about the outlook for interest rates continued to weigh on the markets.

Traders may also have been reluctant to make significant bets ahead of the release of some key economic data this week that could impact the outlook for interest rates.

Most of the major sectors ended the day showing only modest moves contributing to the lackluster close by the broader markets.

Airline stocks showed a significant move to the downside, however, with the NYSE Arca Airline Index falling by 1.5 percent to its lowest closing level in six months.

Significant weakness also emerged among banking stocks, as reflected by the 1.3 percent loss posted by the KBW Bank Index. The index fell to a nearly three-month closing low.

Tobacco and commercial real estate stocks also saw some weakness on the day, while strength remained visible among computer hardware and software socks.

Commodity, Currency Markets

Crude oil futures are inching up $0.07 to $90.10 a barrel after rising $0.40 to $90.03 a barrel last Friday. Meanwhile, after edging up $6 to $1,945.60 an ounce in the previous session, gold futures are slipping $2.30 to $1,943.30 an ounce.

On the currency front, the U.S. dollar is trading at 148.69 yen versus the 148.37 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0625 compared to last Friday’s $1.0653.

Asia

Asian stocks ended mixed on Monday as concerns about China’s property market returned to the fore and investors awaited inflation data from across the region for directional cues. Inflation data from Singapore, Australia and Japan’s Tokyo region are due later this week.

The dollar hovered around six-month highs in Asian trading and gold was little changed, while oil prices rose amid signs of tight supply after a Russian ban on fuel exports.

Chinese stocks closed lower after Evergrande’s debt revamp hit a roadblock. Investors also looked ahead to purchasing managers’ index data, due later in the week, for additional clues about the economic recovery.

China’s Shanghai Composite Index fell 0.5 percent to 3,115.61, while Hong Kong’s Hang Seng Index tumbled 1.8 percent to 17,729.29.

China Evergrande Group shares plunged nearly 22 percent in Hong Kong after the world’s most indebted property developer said it was unable to issue new debt due to an ongoing investigation into its main domestic subsidiary, Hengda Real Estate Group Co.

Japanese shares posted strong gains as the yen nudged towards the closely watched 150 per dollar level on expectations of a widening interest rate gap between Japan and the United States.

The Nikkei 225 Index jumped 0.9 percent to 32,678.62, snapping a four-day losing streak, after the Bank of Japan on Friday stuck to its ultra-easy monetary policy and made no changes to its outlook.

Health care firm Eisai rallied 2 percent after its breakthrough Alzheimer’s drug won clearance from Japanese regulators.

Mitsubishi Chemical Group added 1.9 percent after reports that it plans to build a factory for the production of Argon Fluoride photoresist materials required for semiconductor manufacturing.

Seoul stocks closed lower, with the Kospi ending down 0.5 percent at 2,495.76 on uncertainty about the Fed’s future actions.

Australian markets ended slightly higher ahead of inflation data due on Wednesday. While technology, energy and real estate stocks advanced, heavyweight mining and banking stocks ended on a weak note.

The benchmark S&P/ASX 200 Index edged up 0.1 percent to 7,076.50, while the broader All Ordinaries index closed 0.1 percent higher at 7,278.60. Qantas dropped 1.5 percent after the airline warned of rising fuel costs.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally higher at 11,377.12 after a choppy session.

Europe

European stocks have fallen on Monday, as concerns about China’s property market returned to the fore and a survey showed German business sentiment slightly worsened in September.

The Ifo institute said its business climate index stood at 85.7 versus a score of 85.2 forecast by analysts.

While the German DAX Index has slumped by 1.1 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both down by 1.0 percent.

The euro has edged lower against the dollar after European Central Bank (ECB) Governing Council member Francois Villeroy de Galhau said that interest rates should remain at these levels for a sufficiently long period of time.

ECB President Christine Lagarde is scheduled to testify before the European Commission’s Committee on Economic and Monetary Affairs later in the day, with investors looking for more clues to indicate that the eurozone’s central bank is done hiking.

Miners Anglo American, Antofagasta and Glencore have fallen on concerns about financial problems in China’s property sector after Evergrande’s debt restructuring hit a roadblock.

China Evergrande Group, the world’s most indebted property developer, said it was unable to issue new debt due to an ongoing investigation into its main domestic subsidiary, Hengda Real Estate Group Co.

China-exposed luxury stocks such as Hermes International, Kering and LVMH have also moved notably lower in Paris.

Gambling firm Entain has also plunged in London after it warned on its online net gaming revenues for the third quarter and the full year.

Insurer Aviva has also moved to the downside after it agreed to acquire AIG’s U.K. protection business.

Meanwhile, CRH has rallied after the building materials giant announced the repurchase of 17.7 million ordinary shares.

Swedish property group SBB has also soared after it agreed to cede control in a portfolio of school buildings to Canada’s Brookfield Asset Management Ltd.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.

Stocks In Focus

Shares of Opendoor Technologies (OPEN) are moving sharply lower in pre-market trading after Citi cut its price target on the online real estate company’s stock to $2.70 per share from $3.90 per share.

Information technology company HP Inc. (HPQ) may also come under pressure following news Warren Buffett’s Berkshire Hathaway (BRK-B) sold 4.8 million shares or approximately $130 million of the company’s stock last week.

On the other hand, shares of AstraZeneca (AZN) are likely to see initial strength after Jefferies upgraded its rating on the drug giant’s stock to Buy from Hold.

Chemical giant Dow Inc. (DOW) may also move to the upside after JPMorgan upgraded its rating on the company’s stock to Overweight from Neutral.