Futures Markets Signal Huge Losses for European, Asian Stocks on Monday
Stocks in Asia and Europe are poised for huge losses on Monday, with pre-market futures trading signaling a continuation of Wall Street’s epic selloff last week.
Market Meltdown Hits Europe, Asia
Asian and European stock futures fell hard on Monday, pointing to a grim start to the day for major exchanges. Japan’s Nikkei 225 futures contract was down 140 points at the time of writing. China’s Shanghai Shenzhen CSI 300 Index for April settlement plunged 190 points.
In Europe, futures trading implied a sharp selloff for German, French and British stocks. Germany’s export-oriented DAX futures contract plunged 179 points. France’s CAC 40 fell 71.50 points and the U.K.’s FTSE declined 64 points.
Global stocks have a tendency of following their U.S. counterparts on Wall Street. U.S. equities are coming off their worst weekly performance in more than two years on political upheaval stemming from President Trump’s trade war. Last week, President Trump approved $60 billion in tariffs on Chinese imports. Less than 24 hours later, China introduced retaliatory measures of its own targeting U.S. goods.
The Dow Jones Industrial Average posted a combined drop of more than 1,100 points on Thursday and Friday, where it closed at its lowest level since early February.
There’s strong reason to believe that the so-called Trump reflation trade has come to an end. Rising interest rates, political instability and a massive scandal involving Facebook have threatened to undue 14 months of record-setting growth.
China to Shake Up Energy Futures Market
The Shanghai International Energy Exchange on Monday will launch its yuan-denominated crude contracts, a move that could shake up the energy markets. As the world’s biggest energy buyer, China is now offering foreigners the ability to buy and sell yuan-based futures. According to Bloomberg, the new contract may one day challenge the traditions benchmarks of U.S. West Texas Intermediate (WTI) in New York and Brent crude in London.
By introducing the first yuan-denominated oil contract, China is essentially promoting the use of its national currency globally – a long-stated objective of the Communist Party in Beijing. China moved closer to that goal in 2016 by joining the International Monetary Fund’s elite basket of special drawing rights (SDR) currencies. By listing futures contracts in domestic currency, China also benefits from a benchmark that reflects oil products that are consumed locally.
The opening price for the front-month futures contract, which begins trading at 9:00 a.m. local time, will be Rmb416.
China imported a daily average of 8.4 million barrels of crude last year, surpassing the 7.9 million barrels per day brought in by the United States.
Energy prices traded higher overnight, with WTI futures for May settlement climbing 42 cents, or 0.6%, to $66.30 a barrel. ICE Brent futures notched gains of 35 cents, or 0.5%, to $70.80 a barrel.
Precious metals were virtually unchanged following Friday’s fear-induced upsurge. Gold for June delivery is currently trading at $1,353.40 a troy ounce, the highest since mid-February.
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