Stock futures lower despite fall in U.S. jobless claims

U.S. stock-index futures fell early Thursday, while investors sift through economic data including the weekly jobless benefit claims report, after the stock market posted one of its best daily gains in weeks on Wednesday.

How are equity indexes performing?

Futures for the Dow Jones Industrial Average


were off 22 points, or 0.1%, at 29,069; those for the S&P 500 index


were off 16.20 points at 3,563, a decline of 0.5%; Nasdaq-100 futures


were down 140.50 points, or 1.1%, at 12,271.

On Wednesday, Dow

surged 454.84 points, or 1.6%, ending at 29,100.50, or 1.5% away from its Feb. 12 closing high of 29,551.42. The S&P 500 index

climbed 54.19 points, or 1.5%, to settle at a record 3,580.84, its 22nd record close this year. The Nasdaq Composite Index

advanced 116.78 points to close at a record 12,056.44, a gain of 1%, and its 43rd record close of the year.

What’s driving the market?

After a day of records for the S&P 500 and the Nasdaq Composite and the rapid of approach of the Dow to its own record, investors watched U.S. weekly jobless benefits claims data on Thursday morning.

Total new applications for unemployment benefits in the latest weekly period ending in Aug. 30 fell 130,000 to a seasonally adjusted 881,000 or lower than the consensus estimate of 940,000. This comes after the Labor Department said it tweaked its seasonal adjustment method amid the COVID-19 pandemic.

In other data, a revised reading of U.S. second-quarter productivity rose 10.1%, while the trade deficit widened to $63.6 billion.

Read: ADP says private sector added a less-than-expected 428,000 new jobs in August

Investors will also be watching a reading on the purchasing managers index in services from IHS Markit at 9:45 a.m. ET, and a survey by the Institute of Supply Management on activity in the service sector at 10 a.m. ET.

Market participants have been contending with a nearly incessant climb higher, with the focus on remedies for COVID helping to partially buttress the recent run-up. That said, Wednesday’s climb for stocks came even as large-capitalization technology-related stocks staged a pullback that didn’t disrupt the upward momentum of the broader equity market. Tech-related names have led the rebound of the market from coronavirus-lows but some strategists spotted encouraging signs that other areas beyond tech-related names were starting to rise.

“The more broad based this becomes, the more it signals a turning of the tide as far as the economic outlook is concerned, at least among those on Wall Street,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research note.

However, there are concerns that market has climbed too far and too fast and that optimism over a vaccine for coronavirus is misplaced. The Centers for Disease Control and Prevention urged states to speed up approval for vaccine distribution sites by Nov. 1, which is just days before the presidential election.

Meanwhile, doubts about traction for further fiscal stimulus from Washington lawmakers has continued to haunt investors. Investors have been betting on Republicans and Democrats striking a deal later this month to offer additional relief to American consumers and businesses, after talks stalled in August. On Tuesday, House Speaker Nancy Pelosi said Democrats and Republicans still have “serious differences,” following a brief phone call.

Separately, tensions flared up between Beijing and Washington as the Trump administration signaled plans to impose new restrictions on Chinese diplomats in the U.S., citing Beijing’s use of similar measures on American envoys. The Chinese embassy in Washington responded by accusing the U.S. of violating international conventions.

Which stocks are in focus?
  • Michaels Cos. Inc. shares

    soared 6.7% in premarket trade, after the arts and crafts retailer blew past estimates for the second quarter as stores reopened after being closed during the pandemic.

  • Shares of Sanofi

    gained 0.4% before the bell after the drugmaker and GlaxoSmithKline

    said their COVID-19 vaccine candidate has entered a Phase 1/2 clinical trial.

  • Arconic Corp.

    said Thursday it restored the salaries and 401K match for all of its U.S. salaried employees, including executives on Sept. 1, after cutting them earlier this year to counter the impact of the coronavirus pandemic.

  • Shares of Designer Brands Inc.

    plummeted 19% in premarket trading Thursday, after the parent of the DSW Designer Shoe Warehouse retail chain reported a wider-than-expected fiscal second quarter

  • Facebook

    slipped after announcing Thursday it will ban new political ads from running in the week before the Nov. 3 presidential election.

How are other markets trading?

The 10-year Treasury note yield

edged 0.3 basis point higher to 0.653%. Bond prices move inversely to yields.

The ICE U.S. dollar index

, which tracks the performance of the greenback against its major rivals, was up 0.2%.

Gold futures

were down 0.4% to trade at $1,936.80 an ounce, on the New York Mercantile Exchange. U.S. benchmark crude futures

fell 2.2% to a one-month low of $40.61 a barrel.

The Stoxx Europe 600 index

rose 0.4%, while the U.K.’s benchmark FTSE

as up 0.5%. In Asia, Hong Kong’s Hang Seng index

fell 0.5% and China’s CSI 300

closed 0.6% lower. The Nikkei

rose 0.9%.

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Uber plans to expand services across Quebec this fall By Reuters

© Reuters. Uber and Lyft drivers demonstrate over basic employee rights in California

(Reuters) – Uber Technologies (NYSE:) Inc on Wednesday said it plans to expand its ride-hailing services across the Canadian province of Quebec this fall.

The announcement comes as Quebec braces for a new taxi reform bill, which will abolish the costly taxi permit system and also make way for app-based ride-hailing services such as Uber.

The company did not give a specific date for the expansion of its service throughout the province.

Quebec, which makes up 24% of the Canadian population, was worst hit by the coronavirus crisis in the country and began to gradually reopen its economy in May.

Uber’s ride-hailing segment also remained battered by the pandemic during the second quarter, with revenue from the United States and Canada, its largest combined market, declining to $1.25 billion.

As part of an ongoing pilot program started in 2016, the company’s services are currently available in Montreal, Quebec, and Gatineau.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Global dividends suffer worst quarterly fall since financial crisis

Global dividend payments plunged to their lowest level in more than a decade, as companies moved to protect their balance sheets amid the pandemic, dealing a massive blow to investors that rely on the payouts for growing their wealth.

Total shareholder payouts fell by $108 billion to $382 billion, the lowest second-quarter total since 2012, according to Janus Henderson’s index of global payouts, published on Monday.

The 22% decline was the worst since the asset manager launched the index in 2009.

In a best-case scenario, Janus Henderson now expects global dividends to fall 19% on an underlying basis this year, paying $1.18 trillion. The worst-case scenario could see payouts drop 25%, paying $1.10 trillion.

“Despite the cuts witnessed so far, we still expect global dividends to exceed $1 trillion this year and next,” said Jane Shoemake, investment director, global equity income at Janus Henderson.

Rio Tinto
and China Mobile

were the three biggest dividend payers, the report found, while Microsoft

was the sixth-biggest payer, followed by AT&T

in seventh place.

Opinion:Three dividend stocks of cash-flow-rich companies poised to thrive during this economic crisis

Dividends fell in every region of the world, except in North America, thanks in particular to resilience among Canadian companies, where dividends grew 4.1%. This makes Canada one of only two major countries to see payments increase.

Only 10% of U.S. companies cut their payouts, with the “vast majority” choosing instead to suspend stock buybacks, which totaled $700 billion in 2019, according to estimates by Goldman Sachs.

Blue-chip names in the U.S. that cut payouts included Boeing
General Motors

and Walt Disney

The report noted that U.S. companies set their dividends once a year and pay them in four equal installments starting from the fourth quarter, meaning investors are more likely to see the impact of the pandemic on payouts near the end of the year.

The worst-affected regions were Europe and the U.K., which saw falls of 45% and 54% respectively on an underlying basis.

Read:Pandemic ‘wrecks’ FTSE 100 dividend outlook for 2020, as U.K. payouts fall to lowest levels since 2014

Shoemake said most European companies pay just once a year in the second quarter, so a dividend cancellation has a disproportionately large impact on the annual total, but it also means 2021 should show a rebound in Europe. “For the U.K., the rebound will be smaller as several companies, not least oil giants Shell and BP, have taken the opportunity to reset their payouts at a lower level,” she said.

In April, Royal Dutch Shell

lost its crown as the world’s largest dividend payer as it slashed payout for the first time since World War II, while in August, BP

cut its dividend in half after the oil major posted a $16.8 billion loss for the second quarter.

However, several U.K. companies have in recent weeks announced plans to restore dividends. On Monday, Bunzl
the FTSE 100-listed distribution group, said it would restate its previously suspended final dividend following a better than expected trading performance during the first half of the year.

France, Europe’s largest dividend payer, saw total dividends reach their lowest level in at least a decade, though some of the lost French income will be restored later in 2020, Janus Henderson said.

Read: Europe’s Banks Told to Hold Off on Dividends

Almost half of Europe’s dividend cuts came from the banking sector, as regulatory pressure from the Bank of England to free up capital during the coronavirus crisis saw HSBC
Standard Chartered

and Lloyds Banking Group

all canceling their payouts.

In July, the European Central Bank said lenders should refrain from paying dividends and buying back shares until January 2021, to help banks absorb losses during the pandemic.

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Why the dollar’s fall could turn into a rout if ‘political disarray’ continues

Investors left confused by the U.S. dollar’s accelerating decline might want to look to Washington for an answer.

“The state of political disarray is clearly weighing on the buck as the failure to produce more fiscal stimulus [and] the clearly partisan skirmishing over mail-in voting that threatens to undermine the credibility of the election are all taking their toll on the dollar,” said Boris Schlossberg, managing director at BK Asset Management, in a Tuesday note.

The currency tumbled 4% in July, as measured by the ICE U.S. Dollar Index
which tracks its value versus a basket of six major rivals, for its biggest monthly fall in nearly a decade. After some consolidation earlier this month, the dollar is back under pressure, with the index sliding 0.6% Tuesday to its lowest since May 2018.

Spending stalemate

Washington remains in a stalemate over extending a fiscal aid package that lapsed at the end of July and included $600 a week in additional unemployment benefits. President Donald Trump earlier this month signed executive orders aimed at providing up to $400 a week in additional benefits, but the order faces logistical and political challenges.

Senate Republicans were planning to introduce a scaled back stimulus plan this week that would include $300 a week in additional benefits, according to news reports.

Post Office battle

On Tuesday Postmaster General Louis DeJoy pledged that the mail service is ready today to handle all of the mail-in ballots it receives in November after warning last Friday it may not be able to do so in time. The agency previously said it had stopped removing mailboxes and mail-sorting machines in response to an outcry from lawmakers.

House Democrats have called top U.S. Postal Service officials to testify before a panel on Aug. 24 regarding concerns over mail delays and cost-cutting measures put in place amid budget shortfalls by DeJoy. Trump last Thursday told Fox Business Network that he had declined to approve $25 billion in emergency funding for the agency because Democrats were seeking to expand mail-in voting ahead of the Nov. 3 presidential election.

Election jitters or all about the Fed?

Fears of a muddled election outcome in November alongside signs of an increasingly polarized electorate were cited by some analysts as a possible driver for the currency’s July swoon. Some dollar watchers have expressed fear the greenback could fall hard in the event of election-related turmoil.

Read: Dollar could be a ‘crash risk’ if U.S. loses ‘credibility’, analyst says

Others have argued that dollar weakness is largely a function of a lagging U.S. response to the pandemic amid signs much of the rest of the developed world had made more progress in containing the virus and moving toward reopening, though a rise in cases in Europe has more recently resulted in new rounds of restrictions.

An aggressive response by the Federal Reserve, and expectations it will move to provide additional monetary stimulus if the economic rebound stalls, particularly if politicians remain stalemated, were also seen by some analysts as the primary driver of the dollar’s decline.

“The Fed seems certain to loosen its interpretation of its inflation mandate, and is working hand-in-glove with the government to make sure that funds are available to finance fiscal spending, yet 5-year/5-year inflation swaps [a measure of future inflation expectations] are at 2%, just 0.1% above the average CPI rate of the last decade,” said Kit Juckes, global macro strategist at Société Générale, in a note.

“When I look at it like that, the very least I should expect is that the Fed manages to significantly cheapen the dollar. In real terms, it’s about 7% off its peak, but it’s still 25% above the 2011 levels,” he said.

The euro
meanwhile, was up 0.5% versus the dollar, trading near $1.1952, its highest since May 2018. The euro’s strength is seen potentially pushing the European Central Bank to boost its own bond-buying program.

Weaker dollar, stronger stocks?

The S&P 500 scored a small gain Tuesday, to notch a new record close, completing a round trip that saw the U.S. large-cap benchmark plunge by 34% from a record Feb. 19 close to its March 23 low as the COVID-19 pandemic forced the near-shutdown of the U.S. and global economy. The Dow Jones Industrial Average

fell 66.85 points, or 0.2%.

A weaker dollar, in general, is viewed as a positive for equities, though investors and analysts have noted that the negative correlation between the currency and non-U.S. stocks is stronger than the negative correlation between the greenback and U.S. equities.

See: Here’s what the U.S. dollar’s fall means for the stock market

‘Favored safe haven’

And other analysts have argued that the dollar is likely to prove to be a port in the storm should equities and other assets perceived as risky take a hit in coming months.

In fact, analysts at Morgan Stanley on Tuesday argued that the dollar may be even more favored in such an event than traditional havens like the Swiss franc

and Japanese yen

While those currencies will continue to benefit from any flights to safety, the U.S. dollar “ is likely to become the favored safe haven as the fall in
U.S. rates this year makes it an attractive funding currency for borrowing and carry trades,” they wrote. Carry trades are a popular strategy in which a trader typically borrows in a low-yielding currency and converts it into a higher-yielding currency or uses it to buy assets denominated in the second currency.

Gold tells the tale?

Schlossberg, however, argued that a renewed rise by gold
which pushed back above $2,000 an ounce, is the best expression of weak dollar sentiment.

While gold’s rally to all-time highs this summer has largely been a function of a fall in real, or inflation-adjusted Treasury yields by eliminating the opportunity cost of holding a nonyielding asset like a precious metal, the rebound came despite a bounce last week in rates, he noted.

That means gold “is now acting as a store of value as the market loses faith in the leadership of the United States of America,” Schlossberg wrote. “The longer the stalemate in D.C. remains in place the greater the danger that the dollar selloff can turn into a rout.”

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UK bailout talks for Jaguar Land Rover and Tata Steel fall through: FT report By Reuters

© Reuters. Outbreak of the coronavirus disease (COVID-19) in Milton Keynes

(Reuters) – Bailout talks between Jaguar Land Rover and Tata Steel with the UK government have ended, leaving both firms to rely on private financing to overcome the impact of coronavirus on business, the Financial Times reported on Friday.

The report said that talks for an emergency funding fell through as Jaguar Land Rover (JLR) did not qualify for taxpayer support. It is the luxury car unit of India’s Tata Motors Ltd (NS:) and Tata Steel, both owned by Indian conglomerate Tata Group.

The bailout plan, titled “Project Birch”, had been authorized by Finance Minister Rishi Sunak in May to rescue companies that are seen as strategically important, with the Treasury saying it may step in to support crucial businesses on a “last resort” basis after other options run out.

The report, citing a source familiar with the matter, said that the funding scheme became infeasible for Tata as it imposed strict conditions on any lending.

“Tata Steel remains in ongoing and constructive talks with the UK Government on areas of potential support,” Tata Steel said in an emailed statement.

The UK Treasury said it would not comment on individual companies. Tata Motors did not immediately respond to request for comment.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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