FYI: Futures on Sunday evening pointed to a lower open for stocks stateside when they open on Monday.
Dow Jones Industrial Average futures dropped 281.00 points, implying an opening decline of 276.01 points on Monday’s open, as of 1:03 a.m. ET Monday. Futures also pointed to opening declines for the S&P 500 and Nasdaq on Monday.
The moves came amid market turmoil in the Asian trading session on Monday, with Hong Kong’s Hang Seng index dropping nearly 3% and Japan’s Nikkei 225 falling more than 2.5%. The MSCI Asia ex-Japan index also fell more than 2%.
U.S. Treasurys also saw large movements, with the yield on the closely-watched 10-year Treasury note falling to as low as 1.763%. It was last at 1.7803% as of 1:18 a.m. ET Monday.
Stocks across Asia fell and the Chinese yuan depreciated to a new low in offshore trading, following an escalation in the U.S.-China trade dispute and widespread protests in Hong Kong.
Stock indexes in Japan and Korea declined more than 2% Monday morning in Asia, while the Chinese yuan weakened beyond the psychologically important 7-per-dollar level, falling as much as 1.9% to 7.1087 per dollar in Hong Kong in early trading. S&P 500 futures dropped 1.1%.
Hong Kong’s Hang Seng Index fell nearly 3%, as a citywide strike disrupted the airport and subway services. It followed a ninth weekend of protests against a controversial extradition bill and China’s growing influence on the city. In a speech Monday, Hong Kong’s leader Carrie Lam said society has become dangerous and unstable. The city’s stock market has fallen 9% in the past few weeks as the protests dented business sentiment and weighed on economic growth.
China’s central bank said on Monday that the yuan’s decline was a result of trade protectionism and higher tariffs on Chinese goods. In a statement, the People’s Bank of China said that the yuan remains stable and strong against a trade-weighted basket of currencies, and that it has the ability to keep it at a “reasonable equilibrium.” It also said it would crack down on short-term speculation in the yuan.
At more than 7 against the dollar, the yuan has weakened beyond a point that policy makers have defended at various times in recent years. The worry is a weaker yuan could hurt Chinese residents and companies, prompting a capital flight similar to what took place in 2015 and 2016.
Stocks in mainland China were lower on Monday but didn’t decline as much as markets in Hong Kong and Japan. The Shanghai Composite Index was down 0.81%, while stocks in Shenzhen lost 0.6%.
The selloff on Monday also spilled into the corporate debt markets. Spreads on U.S. dollar investment-grade and high-yield bonds all widened, traders said, meaning investors were demanding to be paid more to take on risk.
Investors flocked to assets viewed as havens in times of volatility. U.S. Treasurys rallied, pushing the benchmark 10-year yield down to 1.81%, its lowest since November 2016. The Japanese yen strengthened 0.7% against the dollar.
Regards,
Ted
WSJ:
https://www.wsj.com/articles/stocks-yuan-drop-sharply-as-trade-spat-intensifies-11564981961Bloomberg
https://www.bloomberg.com/news/articles/2019-08-04/asia-stocks-set-to-drop-with-trade-back-in-focus-markets-wrap?srnd=premiumIBD:
https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-apple-stock-market-rally-trump-tariffs-amazon-facebook-servicenow/CNBC:
https://www.cnbc.com/2019/08/05/us-futures-amid-trade-turmoil-between-beijing-and-washington.htmlReuters:
https://www.reuters.com/article/us-china-markets/china-lets-yuan-slump-past-7-per-dollar-for-first-time-in-over-decade-as-trade-war-escalates-idUSKCN1UV061U.K.
https://uk.reuters.com/article/uk-britain-stocks/ftse-100-plunges-as-trade-worries-fuel-selloff-idUKKCN1UV0L1Europe:
https://www.reuters.com/article/us-europe-stocks/china-worries-hit-european-stocks-hsbc-dips-idUSKCN1UV0MDAsia:
https://www.marketwatch.com/story/asian-markets-fall-amid-trade-tensions-hong-kong-strife-2019-08-04/printBonds:
https://www.cnbc.com/2019/08/05/us-bonds-10-year-treasury-yield-falls-to-nearly-3-year-low.htmlCurrencies:
https://www.cnbc.com/2019/08/05/forex-markets-chinese-yuan-japanese-yen-in-focus.htmlOil:
https://uk.reuters.com/article/uk-global-oil/oil-prices-fall-as-trade-tensions-hit-demand-outlook-idUKKCN1UV035Gold:
https://www.cnbc.com/2019/08/05/gold-markets-dollar-us-china-trade-in-focus.htmlCuirrent Futures:
https://finviz.com/futures.ashx 
