Nasdaq 100 E-Mini Futures Market News and Commentary
The S&P 500 Index ($SPX) on Monday closed down -4.12 (-0.14%), the Dow Jones Industrials Index ($DOWI) closed down -29.23 (-0.11%), and the Nasdaq 100 Index ($IUXX) closed down -1.54 (-0.02%). U.S. stock indexes traded on both sides of unchanged and finally settled slightly lower on U.S./China trade concerns. Stock futures prices initially fell overnight on Bloomberg's report that China is balking at last Friday's US/Chinese trade agreement and on negative weekend news about the prospects for a Brexit deal this week. Stocks recovered and moved higher for a short time Monday on carry-over from last Friday's news that the Fed will start expanding its balance sheet by buying $60 billion of T-bills per month. The Fed's injection of reserves will improve money market liquidity and is supportive for stocks. Bloomberg reported Monday morning that China wants more talks by the end of October to resolve some sticking points before Chinese President Xi will sign last Friday's trade agreement at November's APEC Summit in Santiago, Chile. Bloomberg said that one of its sources also said that China wants President Trump to agree to scrap the December 15 tariff of 15% on $160 billion of Chinese goods as a precondition for a deal, which the U.S. has not yet agreed to do. President Trump has so far agreed to scrap only the hike in the tariff to 30% from 25% on the original $250 billion of Chinese goods that was otherwise due to take effect this Tuesday (Oct 15). Stock losses were limited Monday on upbeat comments from U.S. Treasury Secretary Mnuchin who spoke on CNBC and said the U.S. and China both made "substantial progress" last week in trade negotiations and that he "expects there will be deal" when President Trump and Chinese President Xi Jinping finalize the accord at a summit in Chile next month. Meanwhile, UK Prime Minister Johnson's Brexit proposal is running into problems in Brussels after the EU's chief Brexit negotiator, Michel Barnier, said on Sunday that PM Johnson's Brexit proposal lacks detail and is not yet good enough as the basis for an agreement. Intensive talks are continuing to try to produce an agreement to be considered at the EU Summit this Thursday and Friday. If a Brexit agreement isn't reached by Saturday (Oct 19), the UK Parliament's Benn act requires PM Johnson to request an extension of the current Brexit deadline of Oct 31. On the negative side for stocks was Chinese trade news that was released Sunday night. China reported that Sep imports fell sharply by -8.5% y/y, which was weaker than expectations of -6.0% y/y and Aug's report of -5.6%. Sep exports fell by -3.2% y/y, which was weaker than expectations of -2.8% and Aug's report of -1.0%. The deterioration in China's imports and exports is bearish for the global economy and for Chinese commodity demand. Meanwhile, Monday's Eurozone Aug industrial production report of +0.4% m/m was slightly stronger than expectations of +0.3% and offset the -0.4% decline seen in July. However, Aug industrial production was down by -2.8% y/y, suggesting a contraction in the Eurozone manufacturing sector. The VIX S&P 500 Volatility Index ($VIX) on Monday fell to a 2-1/2 week low Friday of 14.51% and finished the day down -1.01 at 14.57%. The VIX has fallen back from last Wednesday's 1-1/2 month high of 21.46% and continues to consolidate between the late-July 5-3/4 month low of 11.69% and the early-Aug 9-month high of 24.81%.