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U.S. Futures Slip Amid Weak Data, Trade Doubts

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10/07/2019 | 08:10am EST

By Anna Isaac

-- U.S. stock futures down

-- German manufacturing slips

-- Treasury yields tick higher

U.S. stock futures moved lower ahead of the opening bell, as disappointing economic data in Europe and low expectations for trade talks with China dampened investor confidence.

Contracts tied to the S&P 500 and Dow Jones Industrial Average were down 0.2%.

Shares in General Electric Co. rose 1% in premarket trade, after the company said it would make changes to its pension plans aimed at cutting its pension deficit by up to $8 billion and net debt by $6 billion.

The Stoxx Europe 600 was up 0.5% in late morning trade, supported by gains for health-care stocks and food and beverage companies.

U.S. economic data have recently suggested that weakness in factories may be spreading to other parts of the economy. Last week the ISM manufacturing index slipped to its lowest reading since 2009, while the services sector dropped to a score of 52.6 in September, its worst reading since August 2016.

Chinese Vice Premier Liu He is expected to resume trade discussions with U.S. counterparts later this week.

Any expectations for a broad trade deal between China and the U.S. had been misguided, said Geoffrey Yu, head of the U.K. investment office at the wealth management arm of UBS.

"I'm surprised expectations were that high in the first place. It was clear that China wanted to separate the tech side of things out and focus on the tariff side of things alone," Mr. Yu said.

Markets have had their hopes pared back, and as a result, even a partial deal might be enough "to help keep things on track," he said. Investors would be watching the attitude of the U.S. consumer, and the agricultural sector in particular, for a positive response to any reduction in trade hostilities, Mr. Yu said.

German manufacturing orders declined by 0.6% on the month, official data showed. Economists polled by The Wall Street Journal had forecast a small improvement of 0.2% growth.

Shares in auto-parts maker Continental AG were among the biggest decliners on Monday, falling 1.5%. The company last month confirmed it would close production plants in several countries. Its competitor, Michelin, also said in September it would shut a factory in Germany.

The U.S.-China trade row has weighed on Germany's manufacturing and export-heavy economy throughout the year. But the latest figures also showed that domestic demand had weakened, falling 2.6%, while international orders climbed slightly, by 0.9%.

Yields on German 10-year bunds ticked lower to -0.594%. Yields on bonds fall as prices rise.

Meanwhile, a snapshot of European investor sentiment from research firm Sentix slipped in October, falling deeper into negative territory from the month before.

"Investor confidence in the eurozone is still in near free-fall, and last month's tepid rebound is increasingly looking like a dead-cat bounce," said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, in a note.

In Asia, Japan's Nikkei slipped 0.2%, while Korea's Kospi edged up 0.1%. Markets in Hong Kong and mainland China remained shut for a national holiday

Lee Hardman, currency analyst at MUFG, said there had been a number of reports that China may not be as willing to compromise as much as the Trump administration hopes.

"The U.S. would like a trade deal with China, a wide-ranging deal, but those demands look like they're unlikely to be accepted by China. Things like intellectual property rights and other structural issues like state subsidies look unlikely to be resolved," he said. "China may buy more agricultural goods but it's unclear whether or not that partial agreement will be a big enough win for the U.S."

The Chinese offshore yuan was down 0.3% against the dollar, a move some analysts said reflected worsening prospects of a breakthrough in trade relations with the U.S. The offshore yuan could reach a new low if there isn't a resolution in trade talks by the end of the year, according to MUFG analysts.

In commodities, global-oil benchmark Brent crude edged up 0.9%, and haven asset gold slipped 0.5%.

The head of the Kansas City Federal Reserve, Esther George, said Sunday that she would support a further cut in interest rates if economic data weakened, but that the economy was "in a good place" at the moment.

The yield on the U.S. 10-year Treasury rose to 1.534% on Monday, from 1.515% on Friday.

The WSJ Dollar Index, which measures the currency against a basket of its peers, inched up 0.1%.

Write to Anna Isaac at anna.isaac@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CONTINENTAL AG 1.58% 105.22 Delayed Quote.-10.13%
DJ INDUSTRIAL -0.48% 26950.84 Delayed Quote.-2.02%
GENERAL ELECTRIC COMPANY -3.80% 10.8757 Delayed Quote.1.43%
KOSPI COMPOSITE INDEX -0.74% 2084.67 Real-time Quote.-4.49%
NASDAQ 100 0.40% 8867.674874 Delayed Quote.8.17%
NASDAQ COMP. 0.13% 8975.40308 Delayed Quote.6.73%
NIKKEI 225 -0.79% 22426.19 Real-time Quote.-1.14%
PREMIER, INC. -3.20% 29.31 Delayed Quote.-19.93%
S&P 500 -0.30% 3119.02 Delayed Quote.-0.15%
US DOLLAR INDEX 0.16% 99.87 End-of-day quote.3.17%
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Sales 2020 91 333 M
EBIT 2020 9 718 M
Net income 2020 3 396 M
Debt 2020 16 503 M
Yield 2020 0,35%
P/E ratio 2020 26,9x
P/E ratio 2021 18,5x
EV / Sales2020 1,26x
EV / Sales2021 1,23x
Capitalization 98 939 M
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