Risk remains cautious ahead of European trading
Sentiment is still fragile after yesterday's beat down in Wall Street
- S&P 500 futures -0.1%
- Nikkei -1.4%
- Hang Seng -1.1%
- Shanghai Composite -0.9%
- WTI crude -1.4%
The softer tones in Asian equities are very much expected as they are mainly a follow through of the poor performance seen in US stocks overnight. However, the more notable points for me here are the drop in E-minis and oil.
E-minis have basically pared earlier gains on the day and are now trading at the lows, down by 0.1%. It goes to show that cautious tones remain and that investors may not be too confident of a rebound despite the S&P 500 index closing at its lowest level in 2018 - also lowest daily close since October last year.
On the year, the S&P 500 is down by 4.8% now and as Adam pointed out here, it's time for investors to weigh between further selling and buying value. However, the issue with the decline here is a build up of many things that are affecting sentiment; with worries about global growth slowdown at the forefront of it.
And that isn't something that gives confidence towards valuation and it will be something investors will be torn about as we close out the year. In short, the sentiment there is what will keep stocks on edge until we get more signs to come over the next few months.
As for oil, WTI crude fell settled below the $50 mark yesterday and that is a crucial level from a technical perspective. It opens up the door for sellers to hammer price down towards the August 2017 lows of around $45.50 before aiming towards the June 2017 low of $42.05.
And further deterioration in oil prices won't bode well for equities and risk either as it will exacerbate declines in oil-related stocks and only heighten market worries.
All eyes now turn towards the Fed tomorrow. If Powell doesn't deliver a dovish message, that could very well be the nail in the coffin for equities and risk.