Overnight Markets And News

Sep E-mini S&Ps (ESU18 -0.60%) this morning are down -0.61% and European stocks are down -1.13% as escalating trade tensions weigh on global stock prices. China responded to the U.S. tariffs on $50 billion of Chinese exports by imposing an additional 25% levy on $34 billion of U.S. agricultural and auto exports starting July 6. Also, energy stocks are weaker with Jul WTI crude oil (CLN18 -0.38%) down -0.45% at a 2-month low on expectations OPEC and its allies will announce an increase in crude production when they meet Friday in Vienna. Crude prices recovered from their worst levels on reports OPEC may boost output by only 300,000 to 600,000 bpd over the next few months, less than Russian proposals for a +1.5 million bpd increase, as OPEC seeks to overcome opposition to a hike in production from Iran, Iraq and Venezuela. Asian stocks settled mostly lower: Japan -0.75%, China, Hong Kong and Taiwan closed for the holiday, Australia +0.17%, Singapore -0.97%, South Korea -1.09%, India -0.21%. Japan's Nikkei Stock Index fell to a 1-week low on concern the escalating trade rift between China and the U.S. will reduce global economic growth.

The dollar index (DXY00 unch) is down -0.05%. EUR/USD (^EURUSD +0.09%) is up +0.08%. USD/JPY (^USDJPY -0.13%) is down -0.18%.

Sep 10-year T-note prices (ZNU18 +0-035) are up +2.5 ticks.

The Japan May trade balance was in deficit by -578.3 billion yen, wider than expectations of -205.2 yen. May exports rose +8.1% y/y, stronger than expectations of +7.5% y/y. May exports rose +14.0% y/y, stronger than expectations of +8.0% y/y.

U.S. Stock Preview

Key U.S. news today includes: (1) Fed Vice Chair William Dudley takes part in a panel discussion on ‘Finance, Culture and Society’ hosted by the New York Fed, (2) Jun NAHB housing market index (expected unch at 70, May +2 to 70), (3) USDA weekly grain export inspections, (4) Atlanta Fed President Raphael Bostic (voter) speaks on the economic and monetary policy outlook to the Rotary Club of Savannah, Georgia, (5) New York Fed President John Williams (voter) delivers closing remarks at a New York Fed conference on reforming bank culture and behavior among banks, (6) USDA weekly Crop Progress.

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences this week: Morgan Stanley 5G/AV Summit on Mon, Melius Industrial Tech & Aerospace Forum on Mon, J.P. Morgan Energy Equity Conference on Mon-Wed, JMP Securities Financial Services and Real Estate Conference on Tue, Jefferies Global Consumer Conference on Tue-Wed, Oppenheimer Consumer Growth and e-Commerce Conference on Tue-Wed, Citi Chemicals Conference on Thu, National Business Aviation Association Regional Conference on Thu.

Market Comments

Sep S&P 500 E-minis (ESU18 -0.60%) this morning are down -17.00 points (-0.61%). Friday's closes: S&P 500 -0.10%, Dow Jones -0.34%, Nasdaq 100 -0.33%. The S&P 500 on Friday closed lower on the exchange of tariffs by the U.S. and China on $50 billion of products, and also on reports that the Trump administration is already preparing the list of $100 billion worth of Chinese products due for the next round of tariffs. Stocks were also undercut by the weak May U.S. manufacturing report of -0.7%, which was much weaker than market expectations of unchanged. Stocks found some support on news of the +1.3 point rise in the June U.S. consumer sentiment index.

Sep 10-year T-notes (ZNU18 +0-035) this morning are up +2.5 ticks. Friday's closes: TYU8 +5, FVU8 +2.50. Sep 10-year T-notes on Friday closed higher on safe-haven demand as the U.S and China carried out the first big volley in their budding trade war. T-notes also found support from easy global liquidity after the BOJ's decision to leave its QE program unchanged and leave its 10-year JGB yield target unchanged at zero.

The dollar index (DXY00 unch) this morning is down -0.045 (-0.05%), while EUR/USD (^EURUSD +0.09%) is up +0.0009 (+0.08%) and USD/JPY (^USDJPY -0.13%) is down -0.20 (-0.18%). Friday's closes: Dollar Index -0.091 (-0.10%), EUR/USD +0.00442 (+0.36%), USD/JPY +0.03 (+0.03%). The dollar index on Friday edged to a 7-1/2 month high but then fell back and closed the day slightly lower on long liquidation pressure after Thursday's sharp rally and on concern about the budding U.S./China trade war. The dollar was supported by underlying weakness in EUR/USD after the ECB at its meeting on Thursday pledged to keep interest rates unchanged until at least summer 2019.

Metals this morning are mixed with Aug gold (GCQ18 +0.27%) +5.0 (+0.39%), July silver (SIN18 +0.46%) +0.130 (+0.79%), and July copper (HGN18 -0.41%) -0.006 (-0.17%) at a 1-1/2 week low. Friday's closes: Aug gold -29.80 (-2.28%), Jul silver -0.782 (-4.53%), Jul copper -7.75 (-2.41%). Metals on Friday closed sharply lower on US/Chinese trade war concerns and on the tighter liquidity situation with the Fed on Wednesday raising rates by another +25 bp and the ECB on Thursday announcing an end to its QE program at the end of 2018.

July crude oil prices (CLN18 -0.38%) this morning are down -29 cents (-0.45%) at a 2-month low, while July gasoline (RBN18 +0.42%) is +0.0080 (+0.40%) Friday's closes: Jul crude -1.83 (-2.74%), Jul gasoline -6.78 (-3.24%). Jul crude oil and gasoline on Friday settled sharply lower on the US/Chinese trade war that now involves U.S. oil exports. Crude oil prices were also undercut by expectations that OPEC+ at its meeting on June 15 will decide to boost production and by Friday's Baker Hughes report that active U.S. oil rigs rose by another 1 rig to a new 3-1/4 year high of 863 rigs.

Overnight U.S. Stock Movers

Disney (DIS +0.09%) was downgraded to 'Sell' from 'Hold' at Pivotal Research Group LLC with a price target of $93.

Global Payments (GPN -0.21%) was downgraded to 'Neutral' from 'Buy' at Goldman Sachs.

Dun & Bradstreet (DNB -1.33%) was downgraded to 'Neutral' from 'Outperform' at Baird.

Concho Resources (CXO -1.19%) was rated a new 'Buy' at Williams Capital with a price target of $178.

BlackRock (BLK +0.22%) was upgraded to 'Buy' from 'Hold' at Citigroup with a price target of $610.

Chevron (CVX -1.95%) was upgraded to 'Outperform' from 'Market Perform' at Raymond James with a price target of $140.

Chubb (CB +0.60%) was downgraded to 'Neutral' from 'Buy' at Goldman Sachs.

Fleetcor Technologies (FLT +0.76%) will replace Time Warner in the S&P 500 index as Time Warner is dropped due to its acquisition by AT&T.

Splunk (SPLK -3.05%) was downgraded to sell from neutral by Citi with a price target of $98.

Manhattan Associates (MANH +4.02%) was upgraded to buy at Benchmark Co.

Evergy (EVRG +1.60%) was rated with a Buy on resumed coverage by Guggenheim with a price target of $58.

Cheesecake Factory (CAKE  +5.47%) was downgraded to 'Neutral' from 'Buy' at BTIG due to valuation.

BHP Billiton (BHP AU) was downgraded to Hold by Investec.