U.S. Futures Resume Sell-Off Amid Huawei Technologies CFO Arrest
[BRIEFING.COM] S&P futures vs fair value: -43.00. Nasdaq futures vs fair value: -138.30.
U.S. futures have resumed Tuesday's sell-off, fueled by the arrest of Huawei Technologies' CFO, which has piqued worries about the U.S. and China being able to reach a trade deal in their prescribed 90-day window. The S&P 500 futures are down 43 points, or 1.6%, below fair value.
Specifically, the United States requested the arrest of Meng Wanzhou on Dec. 1 in Canada amid allegations the company violated U.S. trade sanctions on Iran. Ms. Meng is expected to be extradited to the U.S. to face charges.
Worries about potential retaliatory actions by China have undercut a wide range of stocks, but particularly technology issues and the stocks of companies tied into the smartphone and telecom equipment supply chains. Apple (AAPL 171.98, -4.71) trades lower by 2.7% in pre-market hours.
Separately, U.S. Treasuries continue to rise, pushing yields lower, particularly on the shorter-end of the curve. The 2-yr yield is down six basis points to 2.76%, and the 10-yr yield is down three basis points to 2.89%. Meanwhile, the U.S. Dollar Index is flat at 97.04.
Looking at energy, WTI crude is down 2.7% to $51.46/bbl after Saudi Arabia's energy minister proposed a lower-than-expected production cut of 1.0 million barrels per day. OPEC and its allies are expected to come to a decision regarding their current production agreement on Friday. The U.S. Energy Information Administration (EIA) will release its weekly crude inventory report at 11:00 AM ET today.
In economic data, investors will receive numerous reports today: ADP Employment Change for November (Briefing.com consensus 192,000), Trade Balance for October (Briefing.com consensus -$54.7 billion), Q3 Nonfarm Productivity (Briefing.com consensus 2.2%) and Unit Labor Costs (Briefing.com consensus 1.2%), weekly Initial Claims (Briefing.com consensus 225,000) and Continuing Claims, Factory Orders for October (Briefing.com consensus -2.0%), and ISM Services for November (Briefing.com consensus 59.0).
In U.S. Corporate news:
- Hewlett Packard Enterprise (HPE 14.65, -0.40): -2.7% after beating top and bottom line estimates.
- Avista (AVA 44.16, -7.23): -14.1% after the utilities company missed earnings expectations.
- Thor Industries (THO 59.39, -4.92): -7.7% after missing revenue estimates.
Reviewing overnight developments:
- Equity indices in the Asia-Pacific slumped broadly under the weight of large losses that were triggered by reports that Huawei Technologies CFO Meng Wanzhou was arrested in Canada on allegations the company violated U.S. trade sanctions on Iran. Japan's Nikkei -1.9%, Hong Kong's Hang Seng -2.5%, China's Shanghai Composite -1.7%, India's Sensex -1.6%, South Korea's Kospi -1.6%.
- In economic data:
- Japan December Reuters Tankan Index 23 (last 26)
- Australia October trade surplus AUD 2.361 bln (expected AUD 3.100 bln; last AUD 2.940 bln); Exports +1.0% month-over-month (last +1.0%) and imports +3.0% month-over-month (last -1.0%); October Retail Sales +0.3% (expected 0.3%; last 0.1%)
- In news:
- Huawei Technologies CFO Meng Wanzhou is expected to be extradited to the U.S. to face the charges.
- This development has caused a great deal of angst over the idea that it will greatly diminish, if not kill, the chances of the U.S. and China reaching a trade deal in the next 90 days.
- That thought and worries about potential retaliatory actions by China have undercut a wide range of stocks, but particularly technology issues and the stocks of companies tied into the smartphone and telecom equipment supply chains.
- Major European bourses are down across the board, registering large losses that are in keeping with the performance of Asian markets and the opening indication for the U.S. stock market. Germany's DAX -2.4%, UK's FTSE 100 -2.1%, France's CAC 40 -2.2%, Italy's FTSE MIB -2.4%, Spain's IBEX 35 -1.9%.
- In economic data:
- Germany's October Factory Orders +0.3% (expected -0.4%; last 0.1%)
- In news:
- Nervousness about U.S.-China trade relations following the arrest of Huawei Technologies CFO, Meng Wanzhou, have fed the selling interest, which has been driven by worries about potentially adverse implications for global growth.
- Brexit uncertainty also remains a sticking issue, as reports suggest Prime Minster May is being urged by cabinet members to delay the Dec. 11 Brexit vote in Parliament out of fear that it will be defeated and precipitate a change in government. Ms. May, however, is reportedly still inclined to have the vote on Dec. 11.
- Separately, Italian Prime Minister Conte has said he will meet EU President Juncker next Tuesday to present Italy's budget.