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U.S. Futures Tick Higher As China Drops

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02/03/2020 | 08:44am EDT

By Anna Isaac

U.S. stock futures drifted higher as investors turned their focus to the Democratic presidential caucuses in Iowa, even as Chinese markets tumbled sharply in the first day of trading following the extended Lunar New Year break.

Futures tied to the Dow Jones Industrial Average rose 0.6%, while the pan-continental Stoxx Europe 600 gauge edged up 0.2%. In Asia, the Shanghai Composite Index closed 7.7% lower in its steepest drop since August 2015, with many stocks dropping by the maximum 10% that is allowed.

Investors are closely watching Monday's ballot in Iowa, a major electoral battleground, for insights into whether a candidate who supports a bigger role for government may beat out rival Democratic contenders. The early voting state plays a key role in the run-up to the presidential elections in November as it can provide a vital boost to some candidates vying to take on President Trump.

"Markets have previously reacted quite strongly when left-wing populist Democratic candidates have performed well," said Oliver Jones, market economist at Capital Economics.

Many investors are also betting the volatility that has rattled U.S. markets over the past two weeks is here to stay, with the election season ramping up and the viral outbreak from China continuing to curtail business operations and trade. On Friday, the S&P 500 index suffered its worst day since August, wiping out early year-to-date gains.

Ahead of the opening bell in New York, Gilead Sciences climbed 4.7% in offhours trading. The drugmaker on Friday said it had provided doses of an experimental antiviral drug to doctors for the emergency treatment of a small number of patients infected by the new coronavirus.

In China, investors got their first chance in more than a week to parse the potential impact of the coronavirus outbreak on the economy. Efforts to contain the disease -- which has infected more than 17,000 people -- has already led to suspension of flights to the country, a halt or slowdown in business operations, and disruptions to global trade and supply chains.

"The fall of Chinese onshore equities is not a huge surprise, given what's been happening elsewhere," Mr. Jones said. "People are interpreting these falls as catch up."

Brent crude, the global benchmark for oil prices, fell 0.8% Monday. Saudi Arabia is pushing for significant oil-production cuts in response to reduced demand for energy consumption in China following the virus outbreak, according to OPEC officials. Representatives of the Organization of the Petroleum Exporting Countries and its allies are set to meet Tuesday and Wednesday to discuss next steps.

Over in the U.K., the British pound fell 1.2% against the U.S. dollar to trade at about $1.3050. The move reflected concerns about fresh trade talks between the European Union and the U.K., according to Jordan Rochester, a foreign-exchange strategist at Nomura Holdings.

The U.K. formally exited the EU on Friday and entered into a transition period. Both sides fired opening salvos on Monday as they begin the complex negotiations that will determine the terms of their future relationship.

"We expect a tough talk in the opening rounds of the Brexit talks," Mr. Rochester said. "Today, the EU and the U.K. are setting out their stalls."

Among European equities, Ingenico Group climbed 13.5% in Paris after its board of directors agreed on a cash-and-stock merger with payment-services giant Worldline in a transaction that will give Ingenico shareholders 35% of the combined business. Worldline fell about 2% in Paris.

Shares in Siemens Healthineers dropped 5% in Germany after the medical equipment maker's profit fell 12% in the first quarter on higher taxes and tighter margins.

Later in the day, the Institute for Supply Management will provide fresh insights on the strength of the U.S. manufacturing industry. Google's parent, Alphabet, is also scheduled to report earnings after markets close.

--Steven Russolillo, Xie Yu and Caitlin Ostroff contributed to this article.

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

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL 7.73% 22679.99 Delayed Quote.-26.23%
EURO / BRITISH POUND (EUR/GBP) -0.26% 0.88166 Delayed Quote.4.23%
GILEAD SCIENCES -0.61% 77.73 Delayed Quote.20.36%
INGENICO GROUP 13.18% 100.1 Real-time Quote.-8.64%
LONDON BRENT OIL 3.63% 33.1 Delayed Quote.-54.97%
NASDAQ 100 7.35% 8081.662743 Delayed Quote.-13.80%
NASDAQ COMP. 7.33% 7913.238014 Delayed Quote.-17.83%
NOMURA CO., LTD. -3.44% 757 End-of-day quote.-2.32%
NOMURA HOLDINGS, INC. -0.17% 410.1 End-of-day quote.-0.80%
S&P 500 7.03% 2663.68 Delayed Quote.-22.97%
S&P/CITIC 300 INDEX -0.02% 3251.2 Delayed Quote.-8.46%
S&P/CITIC 50 INDEX -0.02% 3296.2 Delayed Quote.-11.80%
SIEMENS AG 7.43% 82 Delayed Quote.-34.50%
SIEMENS HEALTHINEERS AG 5.01% 35.965 Delayed Quote.-20.01%
STOXX EUROPE 600 3.73% 320.58 Delayed Quote.-25.68%
STOXX EUROPE 600 NR 3.63% 695.91 Delayed Quote.-25.18%
WORLDLINE 9.34% 55 Real-time Quote.-20.35%
WTI -8.86% 26.28 Delayed Quote.-59.76%
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