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U.S. Futures Drift Lower Ahead of G-20

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11/30/2018 | 09:12am EDT

By Christopher Whittall

U.S. futures headed lower Friday as investors awaited developments on trade negotiations between the U.S. and China.

Futures pointed to a 0.4% opening loss for the S&P 500 after the benchmark index ended slightly lower on Thursday to snap a three-day winning streak. Still, the S&P 500 and the Dow Jones Industrial Average are both on course to eke out modest gains for November after suffering their weakest month in years in October.

The Stoxx Europe 600 was down 0.5%, dragged lower by declines in auto and banking shares, putting it on track for its second consecutive month of losses.

In Asia, the Shanghai Composite Index rose 0.8% following news that the U.S. and China have been exploring a deal to ease trade tensions. That came ahead of a planned meeting between President Trump and Chinese President Xi Jinping at the Group of 20 leaders summit this weekend.

The trade conflict between the world's two largest economies has been one of several factors weighing on markets this year, along with fears over slowing global growth, heady valuations in the technology sector and the pace at which the Federal Reserve will raise interest rates.

The S&P 500 had climbed nearly 10% for the year to a record in mid-September, but has since pared those gains to trade up only 2.4% in 2018 after a bruising October selloff. Analysts say the recent volatility is symptomatic of the cloudy outlook facing investors.

"We have a higher level of uncertainty" as regards trade, the path of interest rates and global growth, said Ken Monaghan, co-head of high yield at Amundi Pioneer, as well as the drop in oil prices and political issues like Brexit.

"When uncertainty goes up, investors require a higher return," he added.

Oil prices fell after bouncing Thursday on reports that Russian officials are signaling a likely production cut in tandem with other major oil producers. Brent crude was down 1.3% at $59.11 a barrel, taking losses to more than 11% this year.

Shares in Marriott International sank around 4% in U.S. premarket trade after the world's largest hotel company said it found a data breach in its Starwood reservation system that has potentially affected up to 500 million guests. General Electric Co. shares slid 2.5% in premarket trade following a Wall Street Journal report of a Federal probe into a legacy insurance business.

European banking stocks fell, with Deutsche Bank shares under pressure again after German authorities raided the lender's offices Thursday as part of a money-laundering probe. Shares were down 3% recently.

Auto stocks were also lower, with the Stoxx Europe 600 Autos & Parts subindex sliding around 2%. Shares in the industry have been under pressure this week after General Motors announced plans to shut down several U.S. factories. Shares in luxury-car maker Daimler fell 3.2% Friday.

In bonds, the yield on the 10-year Treasury note was slightly lower at 3.012%, according to Tradeweb. Yields have declined this week as Federal Reserve officials have signaled greater uncertainty about maintaining quarterly interest-rate rises next year.

"We do think we're moving into a more volatile world, because to some extent we're moving into a more normal world...[with] the Fed normalizing interest rates," said Andrew Wilson, EMEA chief executive of Goldman Sachs Asset Management.

In the Asia-Pacific region, Australia's S&P/ASX 200 fell 1.6% to end November lower, its third consecutive month of losses. By contrast, Japan's Nikkei Stock Average rose for a sixth straight session, gaining 0.4% to close out November with a nearly 2% gain.

China's Shanghai Composite Index ended November with a modest monthly loss despite rising Friday. The index is down nearly 22% this year amid increasing trade tensions with the U.S.

"We still think there's a significant risk that this trade situation escalates, and that's particularly bad for China," said Mr. Wilson.

In currencies, the WSJ Dollar Index, which measures the dollar against a basket of 16 other currencies, was up 0.2% recently.

Write to Christopher Whittall at christopher.whittall@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP 0.05% 2939.62 End-of-day quote.17.68%
DJ INDUSTRIAL 0.21% 26827.64 Delayed Quote.14.76%
GOLDMAN SACHS GROUP INC. 1.32% 209.25 Delayed Quote.23.63%
NASDAQ 100 0.91% 7940.330875 Delayed Quote.25.47%
NASDAQ COMP. 0.91% 8162.987048 Delayed Quote.22.93%
NIKKEI 225 0.25% 22548.9 Real-time Quote.12.18%
S&P 500 0.69% 3006.72 Delayed Quote.19.12%
S&P/ASX 200 0.39% 6678.6 Real-time Quote.18.39%
US DOLLAR INDEX 0.05% 97.33 End-of-day quote.0.67%
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