U.S. equity futures are pointing to heavy declines on Wall Street as investors adopted a cautious stance in overnight trading amid ongoing trade tensions between the U.S. and China and mounting political risks in Europe. Here are five things you need to know before the start of trading on Tuesday September 3.
1. — The Picture of Dorian? Gray.
Hurricane Dorian was downgraded to a Category Four storm by the National Hurricane Center in Miami last night as it continues to inch along towards Florida’s Atlantic coast carrying wind speeds of up to 125 miles per hour.
Dorian is still considered an “extremely dangerous” storm by the NHC, however, and is said to have caused the deaths of at least five people in the Abaco Islands after ripping through the Bahamas last night with Category Five winds and severe flooding.
The slow-moving storm is now centered around 105 miles east of West Palm Beach, and is expected to turn north and to the east over the next 48 hours.
“It cannot be stressed enough that only a small deviation to the left of the NHC forecast could bring the core of the extremely dangerous hurricane onshore of the Florida east coast within the hurricane warning area,” the NHC said. “In addition, Dorian’s wind field is predicted to expand, which would bring hurricane-force winds closer to the east coast of Florida even if the track does change.”
2. — China to US: See You in Court
China has lodged an official compliant with the World Trade Organization over the U.S. use of import tariffs a day after levies on around $115 billion in China-made goods increased to 15%, saying the move violated the consensus reached by President Donald Trump and President Xi Jinping at the G20 Summit in Osaka.
The deepening row has complicated efforts to arrange a September meeting between the two sides in order to find a way forward in trade talks, with China’s state-backed People’s Daily writing that “If the U.S. truly wants to reach a mutually-benefiting and win-win deal with China, some people in the U.S. must honor the consensus, work in concert with the Chinese side and return to the right track with sincerity.”
3. — U.K. Currency ‘Pounded’
The U.K. pound slumped to its lowest levels since January 2017 in early Tuesday trading after Prime Minister Boris Johnson dared moderate lawmakers in his ruling Conservative Party to either back his government’s plans to leave the EU on October 31 — with or without a bespoke agreement with Brussels — or face expulsion from the party and a national election later next month.
The threat comes as rival lawmakers plan to debate legislation later today that would block a so-called “no Deal” Brexit, with passage reliant on Conservative Party members of parliament who are prepared to defy their Prime Minister.
I think there will be enough people to get this over the line,” said former finance minister Philip Hammond, a Conservative lawmaker who is leading rebels in parliament. “I think there’s a group of Conservatives who feel very strongly that now is a time where we have to put the national interest ahead of any threats to us personally or to our careers.”
The pound was marked 0.5% lower on the session at 1.1980 against the U.S. dollar, the lowest in at least 32 months and some 4.1% south of where it traded when Johnson took office on July 23.
4. — Daddy Dollar
The U.S. dollar is trading at the highest levels in more than two years this week, even as investors bet on near-term rate cuts from the Federal Reserve that would normally weaken the greenback on international foreign exchange markets.
The dollar index, which pegs the currency against a basket of six of its biggest global peers, was marked 0.3% higher at 99.25 in early Tuesday trading, the highest since May 2017. China’s tightly-controlled onshore yuan hit a 2008 low of 7.1785 against the dollar, while the euro held under the 1.10 mark ahead of next week’s European Central Bank policy meeting.
“The Euro is dropping against the Dollar “like crazy,” giving them a big export and manufacturing advantage … and the Fed does NOTHING!,” ,” President Trump wrote on this official Twitter account Friday. “Our Dollar is now the strongest in history. Sounds good, doesn’t it? Except to those (manufacturers) that make product for sale outside the U.S.”
A key benchmark for the dollar’s impact on manufacturing will come later today when the Institute of Supply Management publishes its closely-watched PMI survey. Analysts expect the reading of factory gate activity to fall below the 50 mark that separates growth from contraction for the month of August.
5. — Deadly Boat Fire
Coast Guard officials in Southern California have told the Associated Press that a total of 25 bodies have been recovered from the burnt wreckage of a diving boat 90 miles of the coast of Santa Cruz.
The Conception, a commercial diving boat chartered by marine biologist Kristy Finstad, caught fire early Monday morning after flames were thought to have ignited propane tanks stored on board the 75-foot vessel. Thirty-nine people were said to have traveled on the Conception for a three-day diving excursion organised by Worldwide Diving Adventures of Santa Barbara. Five crew members are known to have survived, with officials still search for the nine missing passengers.
“It’s inconceivable that with all the safety regulations we have in place today, a fire on a boat can lead to the loss of life we saw this morning,” U.S. Senator Dianne Feinstein (D- California) said in a statement. “And we need to understand exactly how the crew was trained and, if they were awake and above-deck, why they were unable to alert or help rescue passengers.”