U.S. stock futures fall as soft China data revives growth concerns, Fed minutes ahead

What’s driving markets

U.S. traders returning from their Independence Day holiday will be met with a risk-off tone across markets after weak data from China sparked fresh concerns about the prospects for global economic growth.

A survey of the world’s second biggest economy showed service sector activity was slower than expected in June, adding to fears that China’s rebound from the COVID lockdown last year continues to stall.

The prices of some assets typically in thrall to perceptions of Chinese demand were under pressure, such as copper
HG00,
-0.90%,
while Sino-sensitive indices such as Germany’s DAX 40
DAX,
-0.73%
were leading declines in Europe.

“‘There are fresh concerns about the global economy powering down as data from China’s service sector underlines how tepid the post-pandemic recovery has become, just as trade tensions between Beijing and Washington ramp up,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“Tech stocks focused on the semi-conductor chip industry will be in sharp focus, following China’s curbs on rare metal exports. There are hopes U.S. Treasury Secretary Janet Yellen will be able to calm increasingly troubled trade waters between the U.S. and China when she holds meetings in Beijing tomorrow, but that may be wishful thinking,” Streeter added.

Read: U.S. reportedly plans to restrict China’s access to cloud services. That could put Amazon and Microsoft in a bind.

The negative shift in sentiment may leave stock markets vulnerable, given recent strong gains and bullish positioning.

The S&P 500 index went into the U.S. Independence Day holiday at a 14-month high having gained 16.1% for the year so far with investors saying they are increasingly optimistic and hedge funds taking bets to levels that are well above average, analysts at JPMorgan noted.

Traders on Wednesday will also have an eye on the minutes of the Federal Reserve’s June policy meeting, when interest rates were left unchanged. Those are due to be published at 2 p.m. Eastern.

“While not much new information is expected from the minutes, the discussion details may shed light on the reasons behind the pause. Market participants will also be keen to identify the factors policymakers will consider when deciding on a potential July rate hike,” said Patrick Munnelly, analyst at TickMill Group.

U.S. economic updates set for release on Wednesday include factory orders for May at 10 a.m., while New York Fed President Williams is due to speak at 4 p.m.. All times Eastern.

Companies in focus

• Rivian Automotive Inc.
  RIVN,
  +17.41%
  climbed 5.8% in premarket trading after Amazon.com Inc. said it had rolled out the first electric delivery vans from the electric-vehicle maker. The e-commerce giant said more than 300 new electric vans from Rivian will hit the road in Germany in the coming weeks. Rivian shares were among the EV makers that got a boost on Monday after upbeat delivery and production data from companies including Tesla Inc.
  TSLA,
  +6.90%
  and Nio
  NIO,
  +3.51%.

• United Parcel Service Inc. stock
  UPS,
  +2.52%
  fell 1.6% in premarket trading after the union representing thousands of workers at the global delivery firm reportedly “walked away from the bargaining table,” and unanimously rejected a contract offer by the company.

• Microsoft Corp.
  MSFT,
  -0.75%
  and Amazon shares
  AMZN,
  -0.11%
  slipped 0.8% and 0.1%, respectively, after The Wall Street Journal, citing sources, reported Tuesday that the White House planned to curb Chinese companies’ access to U.S. cloud-computing services. The article said Amazon and Microsoft could be forced to ask the U.S. government for clearance to provide cloud services that use AI chips to Chinese customers.

• Nikola Corp.
  NKLA,
  -0.72%’s
  stock fell 1.5% premarket Wednesday, after the company reported its second-quarter delivery and production numbers.