Wall Street Seen Lower As World Equities Slump On China Sell-off
New York (Jan 4) Early indications suggest that Wall Street stocks may open Monday's session notably lower, as global equities plunged following China's opening horror show. After a private survey showed manufacturing activity in China contracted at a faster pace, Chinese stocks sold off close to 7%, triggering circuit breaker trading halt. The rest of Asia also wilted, and despite the release of fairly strong domestic manufacturing activity data, European stocks are deep in the red. Added to China fears, geopolitical tensions surrounding the standoff between Iran and Saudi Arabia exacerbated as the latter severed diplomatic ties with the former, sending oil higher. Two separate US manufacturing readings and M&A news, if any, may also impact sentiment.
As of 6:15 am ET , the Dow futures are slumping 261 points, the S&P 500 futures are plunging 29.25 points and the Nasdaq 100 futures are sliding 75.25 points.
US stocks ended the last week of the year 2015 on a down note, capping off a year of volatility engendered by Fed rate hike fears and the precipitous slump of commodities, spearheaded by oil.
Jobs and private sector activity data are among key economic readings scheduled for release in the unfolding week, as traders seek additional clarity on the economic outlook in the New Year. The spotlight is likely to be on the Labor Department's monthly non-farm payrolls data for December, ADP's US private sector payrolls data for December, weekly jobless claims data, the results of the Institute for Supply's national manufacturing and non-manufacturing surveys for December and Markit's final manufacturing and service sector PMIs for December.
Monthly US auto sales results for December, some Fed speeches and the minutes of the December 2015 FOMC meeting, where the Fed began its monetary policy normalization by announcing its first hike in about a decade, could also be on the radar. The Commerce Department's construction spending, trade balance, factor orders, and wholesale trade data, all for November and the Federal Reserve's consumer credit report for November round up the economic events of the week.
Markit is set to release its final US manufacturing PMI data for December at 9:45 am ET . Economists expect the index to be upwardly revised to 52.8 from the flash estimate of 51.3, up slightly from the November reading of 52.6.
The Institute for Supply Management is due to release the results of its national manufacturing survey for December at 10 am ET . The consensus estimate calls for an increase in the manufacturing PMI to 49.2 from 48.6 in November.
Also at 10 am , the Commerce Department is scheduled to release its construction spending data for November. Economists expect construction spending growth of 0.7% month-over-month.
In corporate news, reports suggest that Shire (SHPG) is in advanced talks to buy Baxalta (BXLT), a spin-off unit of Baxter (BAX) for about USD32 billion in cash and stock. It may be recalled that earlier in July, Baxalta spurned a USD30 billion all stock offer by Shire.
Tesla (TSLA) announced that it delivered 17,400 cars in the fourth quarter, including 17,192 Model S cars, taking the total deliveries for the year to 50,580.
Fiat (FCA) announced that the separation of Ferrari (RACE) from the company is completed on January 3rd, 2016 . Fiat shareholders are eligible to receive one share of Ferrari for every 10 Fiat shares they hold.
The major Asian averages experienced intense sell-off, as China halted trading in the afternoon after the Shanghai Composite Index plunged 7% in reaction to factory activity data. Oil's climb in the wake of geopolitical tensions also triggered anxiety. The New Zealand market was closed for a public holiday.
Risk aversion heightened sending the yen higher and this spooked export heavy Nikkei 225 average of Japan . The index ended down 582.73 points or 3.06% at over a month closing low of 18,451. Australia's All Ordinaries closed 21.80 points or 0.41% lower at 5,323.
China halted trading roughly 90 minutes ahead of the open and the index was at a 2-1/2 month low of 3,296 when trading was halted, down 242.92 points or 6.86%. Hong Kong's Hang Seng Index lost 587.28 points or 2.68% before ending at a 2-week low of 21,327.
On the economic front, Chinese manufacturing PMI released by Markit and Caixin showed that manufacturing activity continued to contract in December. The PMI eased to 48.2, belying expectations for a 0.3-point increase to 48.9, as weak orders and renewed decline in output impacting the number.
Data released by the Australian Industry Group showed that manufacturing activity expanded at a slower pace in December, with the corresponding PMI at 51.9, down from 52.5 in November. The final Nikkei / Markit manufacturing PMI for Japan was unchanged at 52.6 in December, but up 0.1 points from the flash estimate.
European stocks are also sharply lower, as the Chinese sell-off assumed global proposition. The averages opened notably lower and fell further in early trading. The French CAC 40 Index, the UK FTSE 100 Index and the German DAX Index are down about 2% or more. The weakness lingers despite the release of final manufacturing reports from the region, which were mostly positive.
In corporate news, E.ON said it has separated its operations from Uniper, effective January 1, 2016 . The company expects the spin-off of Uniper to take place later in 2016 following approval by E.ON shareholders.
On the economic front, final readings released by Markit showed that eurozone December manufacturing PMI came in at 53.2, up from November's 52.8 and the flash reading of 53.1. The German manufacturing PMI was also upwardly revised to 53.2 from 53, while in November the index was at 52.9. However, France's December manufacturing PMI was downwardly revised to 51.4 from 51.6, although it is still up from 50.6 in November.
The Markit /CIPS UK manufacturing PMI unexpectedly fell to 51.9 in December from 52.5 in November, while the consensus estimate was at 53.
Source: AllianceNews
