Stock Index Futures Fall Before U.S. JOLTs Report China Credit Outlook Droops


This morning, December S&P 500 futures (ESZ23) and December Nasdaq 100 E-Mini futures (NQZ23) are down -0.34% and -0.51%, respectively, as investors evaluate China’s debt burden and await U.S. job openings and business activity data. Stock Index Futures Fall Before U.S. JOLTs Report China Credit Outlook Droops.

Global concerns about China’s debt led Moody’s Investors Service to downgrade its outlook for Chinese sovereign bonds from stable to negative on Tuesday. The downgrade “reflects growing evidence that authorities will have to provide financial support for debt-laden local governments and state firms, posing broad risks to China’s fiscal, economic, and institutional strength,” Moody’s said.

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Wall Street’s major indices fell on Monday, with the tech-heavy Nasdaq 100 hitting a 3-week low. After agreeing to acquire Hawaiian Holdings for $1.9 billion, Alaska Air Group Inc. (ALK) fell almost 14%, the top S&P 500 loss. Also, chip stocks fell as U.S. Treasury yields rose, with Intel Corporation (INTC) falling over -3% and AMD falling over -2%. 

NVIDIA Corporation (NVDA) fell more than 3% after Washington Service reported that executives sold $180 million in stock last month, suggesting insider trading. The 3M Company (MMM) stock rose more than 3% after Barclays upgraded it to Equal Weight from Underweight.

Monday’s economic statistics showed that October U.S. manufacturing orders plummeted -3.6% m/m, worse than expected and the worst drop in 3-1/2 years.

U.S. rate futures predict a 99.9% likelihood of no raise at the Fed’s monetary policy committee meeting later this month and an 85.5% chance at the January FOMC meeting. U.S. rate futures predict a 54.2% chance of a 25 basis point Fed rate drop at the March meeting.

Today, AutoZone (AZO), MongoDB (MDB), and Toll Brothers (TOL) will release quarterly profits.

U.S. JOLTs Job Openings data in two hours is the topic today. Economists expect October JOLTs Job Openings to average 9.300M, down from 9.553M.

Investors will also watch the October U.S. ISM Non-Manufacturing PMI, which was 51.8. Economists expect 52.0.

U.S. S&P Global Composite PMI is due today. For November, economists estimate 50.7, compared to October’s 50.7.

The U.S. S&P Global Services PMI will be closely followed today. Economists expect S&P Global Services PMI to be 50.8 in November, up from 50.6 in October.

Bond markets show US 10-year rates at 4.248%, down 0.91%.

As investors analyzed dovish comments from a European central banker and a flurry of regional economic data, the Euro Stoxx 50 futures rose +0.34% this morning. Tuesday saw energy equities rise while mining and healthcare companies fell. The downturn in Eurozone business activity eased last month, but a Tuesday survey suggests the bloc’s GDP will contract again this quarter. 

After European Central Bank board member Isabel Schnabel indicated further interest rate hikes are “rather unlikely” due to a “remarkable” fall in inflation, Eurozone bond yields fell. Qatar Holding, one of Barclays Plc’s top shareholders, sold its stock 510 million pounds ($644 million), causing it to fall almost 2%. After partnering with AT&T to create an ORAN-based telecom network, Telefonaktiebolaget Lm Ericsson (ERICB.S.DX) rose more than 6%.

Spain, Italy, France, Germany, Eurozone Composite PMI, Eurozone Services PMI, U.K. Services PMI, and Eurozone PPI statistics were issued today.

The Spanish November Services PMI was 51.0, below expectations of 51.5.

The Italian November Services PMI was 49.5, above predictions of 48.2.

The French November Services PMI was 45.4, exceeding expectations of 45.3.

The German November Services PMI was 49.6, beating expectations of 48.7.

Eurozone November Composite PMI was 47.6, exceeding expectations of 47.1.

Eurozone November Services PMI was 48.7, above forecasts of 48.2.

UK November Services PMI was 50.9, above forecasts of 50.5.

After estimates of +0.2% m/m and -9.5% y/y, Eurozone October PPI was +0.2% and -9.4%.

Asian stock markets fell today. Shanghai Composite Index (SHCOMP) fell -1.67% and Nikkei 225 Stock Index (NIK) fell -1.37%.

Moody’s downgrade of China’s credit outlook lowered risk sentiment, sending the Shanghai Composite significantly lower today. Tuesday’s loss leaders were real estate, semiconductor, and computer stocks. Hong Kong-listed tech giants fell. On Tuesday, a private-sector survey revealed that China’s services activity reached a 3-month high in November, but an official indicator unexpectedly contracted.

Moody’s Investors Service cut its outlook from stable to negative on Tuesday while maintaining an A1 long-term rating on the country’s sovereign bonds, reflecting worldwide concerns over the world’s second-largest economy’s debt. Foreign investors sold 7.5 billion yuan ($1.05 billion) in Chinese shares on Tuesday, the largest daily outflow since October 19. Investors are now focused on economic statistics later this week, the Politburo meeting, and the annual Central Economic Work Conference.

The November Chinese Caixin Services PMI was 51.5, exceeding expectations of 50.7.

Ken Cheung, chief Asian FX strategist at Mizuho Securities, said the rating downgrade risk is unlikely to derail the debt issuance plan, which might soothe the property sector and China’s sluggish economic concerns.

The Nikkei 225 company Index fell dramatically today, its most significant drop in almost six weeks, due to a chip company sell-off driven by rising U.S. Treasury yields. Tuesday saw chip companies Advantest Corp plunge over 6%, Tokyo Electron fall approximately 4%, and Renesas Electronics Corp decline over 5%. On Tuesday, government data revealed that Tokyo’s core consumer inflation fell more than expected in November, approaching the Bank of Japan’s 2% annual target.

Separately, a business survey indicated on Tuesday that Japan’s service activity increased at its weakest pace in a year in November due to falling new exports and weaker demand. Sakura Internet Inc. rose 7% after Nvidia CEO Jensen Huang said the U.S. chip giant would work with Japanese startups like Sakura Internet to create artificial intelligence factories in Japan. After activist investor Oasis Management disclosed its 10.47% investment in ACSL Ltd., the stock rose more than 6%. The Nikkei Volatility, which includes Nikkei 225 option implied volatility, rose 4.16% to 17.77.

The November Tokyo Core CPI was +2.3% y/y, below expectations of +2.4%.

The November au Jibun Bank Japan Services PMI was 50.8, below estimates of 51.7.