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WASHINGTON (Alliance News) - The major US index futures are pointing to a sharply lower opening on the first trading day of 2019 on Wednesday, with stocks likely to add to the steep losses posted last year.
Lingering concerns about the outlook for to the global economy are likely to weigh on the markets following the release of a report showing a contraction in Chinese manufacturing activity in the month of December.
The report said the Caixin/Markit manufacturing purchasing managers' index edged down to 49.7 in December from 50.2 in November. The reading below 50 indicated the first contraction in nineteen months.
Iris Pang, Greater China Economist at ING, noted the disappointing manufacturing data comes on the heels of reports showing an annual drop in industrial profits and softer retail sales growth.
"We believe that the data reflect that not only has the trade war damaged growth in the export sector. It has also hurt export-related supply chain companies and in turn, domestic demand," Pang said.
"If domestic demand is not supported by fiscal stimulus quickly, then further weakening will pose a risk to job security," she added. "That could create a vicious downwards cycle."
The ongoing government shutdown in the US may also generate selling pressure, with traders likely to keep an eye on the White House amid reports President Donald Trump has invited congressional leaders to a meeting this afternoon.
The meeting comes as the partial government shutdown has entered its twelfth day due to an impasse over funding for Trump's controversial border wall.
Democrats are due to take control of the House on Thursday and intend to move forward with plans to reopen the government without providing funding for the wall, but any bills will need Republican support in the Senate.
Stocks fluctuated over the course of the final trading day of 2018 on Monday before ending the session notably higher. The major averages all closed firmly in positive territory after turning in a mixed performance last Friday.
In the final minutes of trading, the major averages showed a strong move to the upside. The Dow jumped 265.06 points or 1.2% to 23,327.46, the Nasdaq climbed 50.76 points or 0.8% to 6,635.28 and the S&P 500 advanced 21.11 points or 0.9% to 2,506.85.
Nonetheless, the major averages moved significantly lower for the year due largely to the sell-off seen in recent weeks. The Nasdaq tumbled by 3.9%, while the Dow and the S&P 500 plunged by 5.6% and 6.2%, respectively.
The higher close on the day may partly have reflected window dressing, with mutual fund and other portfolio managers looking to improve their performance for the year.
Buying interest was also generated in reaction to comments from Trump expressing optimism about a US-China trade deal.
In a post on Twitter on Saturday, Trump he had a "long and very good" telephone call with Chinese President Xi Jinping.
"Deal is moving along very well," Trump tweeted. "If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!"
Despite Trump's optimism about the potential for a long term trade deal between the world's two largest economies, traders remain skeptical.
Traders also seemed reluctant to make more significant moves amid the ongoing government shutdown in the US and lingering concerns about the global economy.
A lack of major US economic data also kept some traders on the sidelines along with the New Year's Day holiday on Tuesday.
Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 2.3%.
The index continued to recover after ending last Monday's trading at its lowest closing level in well over a year.
Considerable strength also emerged among gold stocks, as reflected by the 1.5% jump by the NYSE Arca Gold Bugs Index. The strength in the sector came despite a modest decrease by the price of gold.
Healthcare, retail, and networking stocks also saw significant strength on the day, while tobacco stocks showed a notable move to the downside.
Commodity, Currency Markets
Crude oil futures are sliding USD0.71 to USD44.70 barrel after inching up USD0.08 to USD45.41 a barrel on Monday. Meanwhile, after slipping USD1.70 to USD1,281.30 ounce in the previous session, gold futures are climbing USD5.30 to USD1,286.60 an ounce.
On the currency front, the US dollar is trading at 109.15 yen compared to the 109.74 it fetched on Tuesday. Against the euro, the dollar is valued at USD1.1373 compared to yesterday's USD1.1465.
Asia
Asian stocks tumbled on Wednesday as the US government shutdown entered its 12th day and a private survey showed that China's manufacturing sector contracted for the first time in 19 months in December due to ongoing trade friction with the US Markets in Japan and New Zealand remained closed for the New Year holidays.
China's Shanghai Composite Index tumbled 28.61 points or 1.2% to 2,465.29 as the Caixin/Markit manufacturing PMI dropped to 49.7 in December from 50.2 in November, adding to investor concerns over slowing growth. Hong Kong's Hang Seng Index plunged 715.35 points or 2.8% to 25,130.35.
Australian stocks also ended sharply lower after a late-afternoon slide. The benchmark S&P/ASX 200 Index slumped 88.60 points or 1.6% to 5,557.80 in light trading after losing nearly 7% in 2018, marking its worst year since 2011. The broader All Ordinaries Index ended down 83.80 points or 1.5% at 5,625.60.
The big four banks fell around 2% after a report showed property values across the country fell for the 15th consecutive month in December.
Mining heavyweights BHP and Rio Tinto dropped 1.6% and 2.3%, respectively, while energy stocks Woodside Petroleum, Oil Search and Santos tumbled 3-4%.
Shares of AusQuest plunged 15.8% after the mining exploration company said it is abandoning two of its projects in Western Australia.
India's Sensex, Singapore's Straits Times index and Malaysia's KLSE Composite index were down around 1% in the absence of fresh overnight cues from Wall Street and Europe, which were closed for the New Year's Day holiday.
Europe
European stocks have fallen sharply on Wednesday, tracking weak Asian markets as disappointing manufacturing data from China added to investor concerns over slowing global growth.
US stock-index futures also extended declines on the first trading day of the year as the government shutdown entered its 12th day with no signs of a workable plan.
Closer to home, the eurozone manufacturing PMI dipped to 51.4 in December from November's 51.8, falling to the lowest level since February of 2016. Meanwhile, the UK PMI extended its upbeat momentum in the month to hit a six-month high of 54.2.
German employment grew to a record high in 2018 despite a slowdown in the economy, preliminary figures from the Federal Statistical Office showed. The number of employed grew by 562,000 persons or 1.3% to an annual average 44.8 million.
While the French CAC 40 Index has tumbled by 1.5%, the UK's FTSE 100 Index is down by 0.8% and the German DAX Index is down by 0.5%.
Automakers have led the declines, with Daimler, Volkswagen, Renault and Peugeot showing notable moves to the downside. Banking stocks have also moved mostly lower.
Oil giant BP PLC and Tullow Oil are also under pressure as oil prices drop more than 1% on growth worries and concerns over surging output in the US and Russia.
Hammerson is also posting a steep loss after the real estate firm said its financial performance for the year ended December 31, 2018 is anticipated to be in line with market expectations.
On the other hand, upstream oil and gas exploration and production company Ophir Energy has jumped after confirming talks with a potential new owner.
US Economic Reports
No major US economic reports are scheduled to be released today.
Stocks In Focus
Shares of Activision Blizzard (ATVI) are seeing notable pre-market weakness after the video game publisher said CFO Spencer Neumann was terminated for cause for violating his legal obligations to the company. Neumann will be replaced by former CFO Dennis Durkin.
Online retail giant Amazon (AMZN) may also move to the downside after Evercore lowered its price target for the company's stock to USD1,800 per share from USD1,990 per share.
Shares of Tesla (TSLA) are also likely to come under pressure after the electric car maker reported weaker than expected fourth quarter deliveries.
Meanwhile, shares of Bausch Health (BHC) may see initial strength after Piper Jaffray upgraded its rating on the drugmaker's stock to Overweight from Neutral.
