Risk Off Mood Pushing Markets To Bear Territory

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Monday, with sentiment pointing to a negative cloud enveloping the equity markets, as Chinese worries accentuate. Market participants view a potential setback to Chinese growth as a risk that could hurt global growth. With the global financial market sell-off giving rising to hopes that the Fed rate hike may be off the tables in the near future, the preoccupation now seems to be the Chinese growth and the fits-and-start global recovery. Crude oil is trading below $39-a-barrel mark and the rest of the commodities, with the exception of gold, are seeing weakness.

U.S. stocks tumbled in the week ended August 21st to multi-year lows, as Chinese growth worries and domestic rate concerns hurt all risky bets.

Last Monday, the major averages ended moderately higher amid the release of mixed economic data and easing yuan worries. Lackluster earnings report from Wal-Mart (WMT), the sell-off in the Chinese market and strong domestic data that triggered rate hike worries sent the major averages lower on Tuesday.

The sell-off continued on Wednesday, as China and Fed rate worries once again served to squeeze out the risk appetite of markets. Joining the global market rout, the major U.S. averages plummeted on Thursday. Stocks declined for the fourth straight day on Friday, sending the major averages to multi-month lows.

For the week ended August 21st, the Dow Industrials plummeted 5.82 percent to a 10-month low of 16,460, the S&P 500 Index plunged 5.77 percent to 1,971, its lowest level since October 2014, and the Nasdaq Composite slumped 6.78 percent to 4,706, its lowest level since February 2, 2015.

Among the sectors, the NYSE Arca Oil Index and the Philadelphia Semiconductor Index lost over 8 percent for the week. The NYSE Arca Airline Index, the NYSE Arca Securities Broker/Dealer Index, the Philadelphia Oil Service Index all fell over 7 percent. The NYSE Arca Biotechnology Index, the KBW Bank Index and the NYSE Arca Computer Hardware Index slipped over 6 percent each. Additionally, the Dow Jones Transportation Average fell 5.37 percent, while the NYSE Arca Gold Bugs Index climbed 8.80 percent.

Currency, Commodity Markets

Crude oil futures are sliding $1.72 to $38.73 a barrel after slumping $2.05 or 4.82 percent to $40.45 a barrel in the week ended August 21st. Crude oil came under pressure from supply glut concerns and the overall risk aversion.

Gold futures, which jumped $45.80 or 4.11 percent to $1,159.60 an ounce in the previous week, are currently edging up $0.20 to $1,159.80 an ounce. The precious metal added luster by virtue of its safe haven appeal.

Among currencies, the dollar weakened against the euro and the yen in the week ended August 21st. The dollar dipped 1.83 percent against the yen before settling the week at 122.04 yen. At the same time, the greenback declined 2.49 against the euro to $1.1386, with the euro gaining on hopes that the U.S. Federal Reserve may be restrained by the global market rout and refrain from raising interest rates in the near term.

The U.S. dollar is currently trading at 120.08 yen and is valued at $1.1513 versus the euro.

Asia

The Asian markets experienced a bloodbath, with China spearheading the plunge downward, as risk aversion grips the markets. Investors scurried off risky bets from equities to commodities to risk currencies.

With the yen appreciating sharply, the Japanese market succumbed to the sell-off spearheaded by exporters. The Nikkei 225 average opened lower and moved roughly sideways. After a leg down, the index moved sideways yet again in the afternoon before ending 895.15 points or 4.61 percent at a 6-month low of 18,541. All but one of the index components retreated.

Australia's All Ordinaries languished below the unchanged line throughout the session before ending down 210.60 points or 4.03 percent at a 2-year low of 5,014. The market witnessed across the board sell-off, with energy and financial stocks leading the declines.

China's Shanghai Composite Index slumped 297.84 points or 8.49 percent, the biggest one-day loss since 2007, before ending at 3,210, the lowest since February 13th, 2015. The index is now in the red for the year. Hong Kong's Hang Seng Index ended at 21,252, down 1,158.05 points or 5.17 percent.

On the economic front, Japan's Cabinet Office released its revised report on economic activity, which showed that the leading economic indicators index for Japan rose less than initially estimated. The index was at 106.5 in June, down from the preliminary reading of 107.2, but was up from 106 in May. June's index was still the highest since March 2014.

Europe

European stocks opened notably lower and is mired in the red, as the markets in the region react to the global sell-off. There aren't any major domestic catalysts to impact market movement.

U.S. Economic Reports

Even as the global markets reel on worries about the global economy, traders are likely to sift through a raft of economic data scheduled for the unfolding week. Notable among these are the Commerce Department's durable goods orders, personal income and spending and new home sales reports, all for July, weekly jobless claims data, the National Association of Realtors' pending home sales index for July, Markit's preliminary service sector PMI for August and the University of Michigan's consumer sentiment survey for August.

The 2-day annual Jackson Hole Symposium scheduled for Thursday and Friday may also showcase the views of central bank officials of major central banks. Some Fed speeches, the results of some regional manufacturing surveys, the results of June house price surveys of the Federal House Finance Agency and S&P/Case-Shiller, preliminary second quarter GDP report and the results of auctions of 2-year, 5-year and 7-year notes round up the economic events of the week.

The Chicago Federal Reserve is scheduled to release the results of its nation activity survey for July at 8:30 am ET. Economists expect the national activity index to rise to 0.20 in July from 0.08 in June.

Atlanta Federal Reserve Bank President Dennis Lockhart is due to speak to the public pension forum in Berkley, California at 3:55 pm ET.

Stocks in Focus

Pfizer (PFE) announced the U.S. Federal Trade Commission has terminated the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to Pfizer's pending acquisition of Hospira (HSP).

DaVita HealthCare (DVA) announced that it has entered into an agreement to acquire Colorado-based Renal Ventures Limited, LLC including a 100 percent interest in all dialysis centers owned by Renal Ventures for $415 million.

Southern Company (SO) and AGL Resources (GAS) announced that the boards of both companies have approved a definitive merger agreement. AGL will become a new wholly owned subsidiary of Southern Company in a transaction with an enterprise value of approximately $12 billion, including a total equity value of approximately $8 billion.

Sonangol and Cobalt International Energy, Inc. (CIE) announced the signing of a Sale and Purchase Agreement for Sonangol to acquire all of Cobalt's 40% participating interest in Blocks 21/09 and 20/11 offshore Angola for $1.75 billion with an effective date of January 1, 2015.