Opening Bell: U.S. Futures Drift On Mixed China Signals; German Steel Giant Sinks

• U.S. futures slip as U.S.-China Hong Kong tensions reach new heights
• European shares drop as steel giant Thyssenkrupp raises red flags
• Yuan strengthens mildly, suggesting trade deal hopes are still alive
• Gold, yen and Treasurys pare gains

Key Events

Futures on the S&P 500, Dow and NASDAQ 100 declined this morning but managed to contain losses, as the diplomatic spat between the world’s two largest economies over Hong Kong matters threatened to turn into a crisis.

U.S. President Donald Trump is expected to sign legislation backing Hong Kong protesters, potentially setting up further confrontation with China after Wednesday's controversy. For its part, the Chinese government has stepped up its warnings against U.S. legislation on the issue, with the Communist Party's daily paper stating that in case of further interference, "the Chinese side will inevitably adopt forceful measures to take resolute revenge, and all consequences will be borne by the United States."

Meanwhile, however, news that China has invited high-level U.S. trade officials for a new round of face-to-face talks in Beijing struck a more positive note, helping equities trim some losses.

Europe's STOXX 600 slipped more markedly lower, dragged down by German steel multinational Thyssenkrupp's (DE:TKAG) shares, which plunged after the group announced it was suspending dividend payments and warned of deepening losses.

In the early Asian session, regional indices hit the lowest price in almost three months on an intraday basis, but downward pressure eased later after Chinese Vice President Liu He said he was “cautiously optimistic” about reaching a phase-one trade deal with the U.S.

The weakening USD/CNY pair in particular—with the dollar little changed against the yuan but giving up earlier gains, and thereby forming a bearish sign—suggests the market remains optimistic about a trade deal.

Hong Kong’s Hang Seng (-1.57%) closed well off the day's highs, as ongoing geopolitical unrest offset the effect of reassurance from China's chief trade negotiator. Technically, the index confirmed a rising channel.

Global Financial Affairs

The yield on 10-year Treasurys climbed, paring most of its losses. Technically, it found support by the 100 DMA as the market attempted to pick a pattern between the long-term downtrend line since November 2018 and the short term rising channel since September.

Risk off was generally easing, with safe havens gold and the yen trimming gains.

Oil inched lower after jumping on Wednesday as U.S. crude stockpiles rose less than expected and inventories at a key storage hub shrank by the most since August.

Up Ahead

• Corporate earnings coming up this week feature consumer brands including: Macy’s (NYSE:M) and Foot Locker (NYSE:FL).
• U.S. initial jobless claims will be published on Thursday.
• Federal Reserve speakers this week include district bank presidents Loretta Mester and Neel Kashkari.

Market Moves

Stocks

The MSCI Asia Pacific Index slid 0.7%.

The MSCI Emerging Market Index declined 0.9%.

Currencies

The Dollar Index was little changed.

The euro was little changed at $1.1078.

The British pound gained 0.1% to $1.2935.

The onshore yuan was little changed at 7.037 per dollar.

The Japanese yen advanced 0.1% to 108.54 per dollar.

Bonds

The yield on 10-year Treasurys slipped one basis point to 1.73%.

The yield on 2-year Treasuries dropped less than one basis point to 1.57%.

Germany’s 10-year yield fell one basis point to -0.36%.

Britain’s 10-year yield gave up one basis point to 0.718%.

Japan’s 10-year yield climbed less than one basis point to -0.105%.

Commodities

West Texas Intermediate crude fell 0.2% to $56.89 a barrel.

Iron ore gained 0.5% to $83.28 per metric ton.

Gold was little changed at $1,472.20 an ounce.