U.S. equity futures declined on Labor Day, as investors reacted to the fallout from North Korea’s latest nuclear provocation. Futures resumed their downtrend early on Tuesday, with the S&P 500, Dow Jones and Nasdaq mini contracts heading for declines.
Equity Markets on Edge
After a three-day weekend, Wall Street returns to full capacity on Tuesday. The S&P 500 Index capped off a six-day winning streak on Friday by closing near record highs. The start to the holiday-shortened week is expected to be more subdued, as investors weigh North Korea’s most provocative nuclear test yet.
European stock markets finished firmly in the red on Monday, with the Stoxx Europe 600 shedding 0.5%. All of Europe’s major bourses declined.
After a volatile start to the week, Asian stocks posted mixed results on Tuesday. Japanese equities were down across the board through the midday, while the MSCI AC Asia Pacific index fell more than half a percent.
Mainland China saw better results, with the CSI 300 Index posting modest gains during in the intraday session.
Gold Rush Continues
The flight to haven assets is continuing this week, with gold prices approaching 12-month highs. December gold, the most actively traded futures contract, is up 0.9% to$1,341.40 a troy ounce on Tuesday. The recent uptrend has pushed bullion into overbought territory, according to the Relative Strength Index (RSI).
Silver also partook in the rally, with the December contract surging to more than four-month highs. The contract was last up 0.8% at $17.97 a troy ounce on the Comex division of the New York Mercantile Exchange.
The Japanese yen – one of the market’s favorite fiat havens – has also strengthened. The USD/JPY exchange rate has declined more than 1% since the start of September.
Labor Day Marks Unofficial End to Summer
The Labor Day weekend also marks the unofficial end to summer in North America. Investors can expect a highly active month of September as trading volumes return to normal.
September is often considered the worst month for investing, especially on Wall Street. This is backed up by historical data stretching back 100 years. Last year, analysts at Bespoke found that the Dow Jones Industrial Average has been lower on average for 100 years. The Stock Trader’s Almanac also found that, since 1950, the Dow Jones and S&P 500 have declined by an average of 1.1% and 0.7%, respectively, during September.
Central Bank Meetings
Central bank meetings headline an active week in the markets. On Tuesday, the Reserve Bank of Australia (RBA) voted to leave monetary policy on hold. The overnight rate has been at 1.5% since August 2016.
The Bank of Canada (BOC) and European Central Bank (ECB) will also deliver rate verdicts this week. The BOC is expected to hike rates for the second time this year after Canada emerged as the G7’s fastest-growing economy through the first half.