Futures on the S&P 500, Dow and NASDAQ 100 followed European stocks lower this morning, before rebounding mildly, as investors digested minutes from the Federal Reserve, ahead of Chairman Jerome Powell's keynote address at Jackson Hole.
On the trade front, remarks from China that any further U.S. tariff measures will lead to escalation further pushed traders to the side of caution.
The STOXX 600 dropped with technology firms as hopes for further U.S. policy easing dwindled after accounts published on Wednesday from the Fed's latest meeting reiterated the July interest rate cut represented a midcycle adjustment rather than a policy shift.
After U.S. shares rallied yesterday, on a dovish interpretation of the minutes, today investors seemed to focus on another element: U.S. policymakers seemed deeply divided over whether to cut rates last month, while they signalled more cohesion in being cautious toward other cuts.
The European Central Bank will also release the accounts of its last policy meeting at 11:30 GMT, prompting more prudence from investors.
Meanwhile, the euro partly pared a decline after data showed France’s private sector demand picked up. European sovereign bonds mostly erased early gains after the French PMI report. Technically, the single currency may be setting up for a small H&S bottom.
The British pound steadied after slipping amid increased speculation of a no-deal Brexit. From a technical perspective, the trading pattern could be developing a small H&S bottom, whose upside breakout would retest the downtrend line since May.
In the earlier Asian session, stocks ended mixed, projecting lingering uncertainty over U.S. monetary and fiscal policy.
The Chinese yuan extended its slide to a 11-year low. While dealers reported that the drop prompted state-owned banks into defensive demand, this new low could translate into new jitters in U.S.-China trade talks. Technically, the advance extended the breakout of the 200 DMA and the upside reversal.
Meanwhile, Hong Kong’s Hang Seng (-0.84%) underperformed as China confirmed the detention of a staff member of the British consulate, amid a mounting media offensive by the Asian country to defend its hard-line stance on Hong Kong's protests.
At the opposite side of the spectrum, Australia’s S&P/ASX 200 (+0.29%) led gains in the region.
The dollar crawled slightly higher after slipping with Treasury yields along a falling-flag pattern, bullish following the previous rally. The structure conforms with the technical setup to garner enough interest to take on the Aug. 1 high.
Gold slid lower even against a—mostly—weakening USD.
Oil advanced but found resistance by the 200 DMA at the top of its falling channel for the third straight day.
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