Wall Street futures edged higher Wednesday, while government bond markets around the world continued to rally, as investors focused on flagging global growth prospects while extending bets on near-term support from the world's biggest central banks.
With the pace of global manufacturing slumping to its lowest levels since 2012 last month, according to PMI data from the world's largest economies, and central banks from London to Tokyo signaling lower rates and deeper liquidity, investors are scaling back equity market bets ahead of the Thursday July Fourth holiday and the key U.S. employment report that will be published the following day.
Market sentiment was further complicated by both concern that a new tariff dispute between Washington and Brussels could escalate over the coming weeks as the two sides continue to argue the legality of subsidies offered to planemakers Boeing (BA - Get Report) and Airbus (EADSY) .
That was compounded by a Reuters report that suggested enforcement officers at the Commerce Department are urging staff to treat Huawei Technologies as a blacklisted company, despite President Donald Trump's statement over the weekend the some export restrictions on the China-backed company would be relaxed following the re-opening of trade talks with Beijing.
Still, bets on lower interest rates, following President Trump's nomination of Judy Shelton and Christoper Waller to the Federal Reserve's Board of Governors, is supporting U.S. and European stocks and setting up Wall Street for another run at record highs.
Contracts tied to the Dow Jones Industrial Average suggest a modest 68 point gain for the 30-stock average, which has risen 14.8% so far this, while this linked to the S&P 500 are indicating a 9.2 bump higher for the broader benchmark after it notched a record closing high of 2,2972.98 points last night.
European stocks were firmer by mid-morning in Frankfurt, with a 0.66% gain for the Stoxx 600 benchmark and a 0.57% lift for Britain's FTSE 100 as the pound tested new 2019 lows against the U.S. dollar, lifting the value of stocks on the benchmark that earn most of their revenues in non-U.K. currencies.
Overnight in Asia, demand concerns and trade uncertainty held regional markets in check, with the MSCI ex-Japan index slipping 0.46% into the close of the session and the Nikkei 225 in Tokyo falling 0.53% to close at 21,638.16 points.
Global government bond yield movements have been far more notable in early Wednesday trading, however, with benchmark 10-year U.S. Treasury notes trading at a September 2016 low of 1.95% and similarly-dated German bunds hitting a fresh record low of -0.39% after EU officials nominated IMF Managing Director Christine Lagarde to replaced Mario Draghi as President of the European Central Bank later this year.
Dovish central bank signalling, which investors expect will be maintained under Largarde at the ECB in Frankfurt, is also holding down currency markets and elevating the U.S. dollar, even as investors continue to bet that the Federal Reserve will cut rates at least two, and possible three more times between now and the end of the year.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher on the session at 96.77 while the euro slid to 1.1284 and the pound slumped to 1.2567 amid easing signals from Bank of England Governor Mark Carney amid the country's seemingly never-end Brexit drama.
Global oil prices were marked modestly higher in the early European session, however, with investors citing a bigger-than-expected 5 million barrel decline in U.S. crude stockpiles, according to the American Petroleum Institute, and the ongoing impact of this week's OPEC+ agreement that will continue to take 1.2 million barrels from the market each day until the first quarter of next year.
Brent crude contracts for August delivery, the global benchmark, were seen 11 cents higher from their Tuesday close in New York and changing hands at $62.61 per barrel in early European trading. WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked 20 cents higher at $56.45 per barrel.