Snapshot:

-Dollar steady; 10-year Treasury yield at 2.067%; stock futures gain; Nymex at $29.82, gold at $1093.90

-Watch for: NAHB housing market index; earnings from Bank of America, Morgan Stanley, Delta Airlines, UnitedHealth Group, After the close: IBM, Netflix, Advanced Micro Devices

News: China’s Growth Slowest in 25 Years; IEA Warns of Further Oil Market Turmoil; UAE Minister: Iran Can Pump Oil if It Wants, But It Will Worsen Global Glut

 
Markets Outlook: 
 
Forex:

In currencies Tuesday, the euro was down 0.1% against the dollar at $1.0878 in early European trade.

Even if the European Central Bank introduces additional quantitative easing, its impact on the yield curve could be too limited to weaken the euro, according to Morgan Stanley, which favors long positions on EUR/USD. The December meeting suggests that QE is preferred over deposit rate cuts as a policy tool. MS is also concerned that the next equity market rout could be driven by weak U.S. data. It suggests buying EUR/USD at current market levels (circa $1.09) with a target of $1.13.

Elsewhere in Asian trade, the dollar gained 0.4% against the yen to Y117.8790.

 
Bonds:

In early European trade, the yield on the 10-year government bond was 2.067%.

Elsewhere, a wave of selling has taken Europe’s corporate-bond market to levels typically seen during recessions, another indication that the turmoil in global markets could spread into the wider economy.

The gap in yields, or spread, between Eurozone high-grade corporate debt and safer government bonds has ballooned to its widest level in nearly three years, according to Barclays bond indexes. Three years ago, the European economy was in recession following the sovereign-debt crisis that had engulfed the continent.

The latest move comes as financial markets, from equities to oil, extended sharp falls on Monday. Concerns over the Chinese economy and a glut of commodities continued to weigh on prices. Asian shares closed lower and the Stoxx Europe 600 was down 0.4%, taking losses for the year to 10%. Brent, the global oil benchmark, was down 0.7%, near a 13-year low.

 
Equities:

U.S. stock futures pointed to a higher open, putting the market on track to rebound a little from its worst 10-session start to a year ever.

The step up came as Asian and European stocks gained, with analysts saying a report on Chinese economic growth spurred stimulus hopes and comforted investors who had feared worse.

U.S. investors, returning from a three-day weekend, also will be digesting a reading on housing and quarterly earnings from Bank of America, UnitedHealth, and Delta Air Lines.

S&P 500 futures rose 1.3%, while Dow futures advanced 1.3%. Nasdaq futures stacked on 1.4%.

The S&P and Dow have dropped 8% and 8.3% so far this year as of Friday’s close, suffering their worst 10 trading days at the beginning of a year ever. On Monday, U.S. stock exchanges were closed for the Martin Luther King Jr. holiday.

China’s government said the nation’s growth rate moderated to 6.8% for the fourth quarter and 6.9% for 2015. The annual pace was the weakest in 25 years, and the quarterly level missed expectations. But analysts said investors now hope Beijing will ramp up stimulus and noted that Chinese markets have already sold off sharply this year.

“The added measures could now be imminent,” said James Hughes at GKFX, in a note, referring to the possible fresh stimulus efforts. He said investors “could well get an announcement before the start of the New Year celebrations at the beginning of February.”

In U.S. economic news, a January figure for a home builders’ index is due at 10 a.m. Eastern Time, with economics polled by MarketWatch expecting a reading of 62.

 
Commodities:

Crude oil futures were trading higher, with bargain hunting limiting the impact of news that China’s economy grew at its slowest pace in a quarter century.

New York Mercantile Exchange, light, sweet crude futures for February delivery traded at $29.82 a barrel at 5.50am ET, up 40 cents in the Globex electronic session. March Brent crude on London’s ICE Futures exchange rose $1.22 to $29.78 a barrel. Bargain hunting provided some support to Brent crude, a day after the removal of sanctions on Iran sparked a fresh slide below $30 a barrel.

“Prices are already quite low. That is why there is bargain hunting,” said Daniel Ang, an analyst at Phillip Futures.

Gold was up 0.3% at $1093.90 a troy ounce.

 
=======Calendar======= 
Tuesday, January 19, 2016 
ET 
0830 CAN International 
         transactions in 
         securities 
1000 US  NAHB Housing Market 
         Index 
1600 US  Treasury International 
         Capital Data 
N/A  US  Obama meets visiting 
         Australian PM 
N/A  US  Texas: Confederate 
         Heroes Day 
====================== 
Top Stories Of The Day:

China’s Growth Slowest in 25 Years

China recorded a pronounced deceleration in growth last year, affirming that a continued slowdown is biting the world’s second-largest economy harder with the downward grind expected to persist.


IEA Warns of Further Oil Market Turmoil

Oil prices could fall further this year as the market faces an “enormous strain” on its ability to absorb new supplies from producers such as Iran, the International Energy Agency said.


UAE Minister: Iran Can Pump Oil if It Wants, But It Will Worsen Global Glut

OPEC member Iran has the right to produce what oil it wants, but any new supply entering the market will further delay its stability and balance, the United Arab Emirates’ energy minister said.


Eurozone Current Account Surplus Widened in November

The eurozone’s current account surplus widened in November, data from the European Central Bank showed Tuesday.


U.K. Inflation Was Lowest on Record in 2015

U.K. inflation was the lowest on record in 2015 despite a small pickup in December, underpinning views by economists and Bank of England officials that inflation will be weak for longer than expected.


BOJ Gov Kuroda: Have Tools Needed to Achieve 2% Inflation

Bank of Japan Gov. Haruhiko Kuroda said Tuesday that the central bank has “plenty of tools” to rejuvenate inflation, countering suspicions that its policy toolbox may be empty after nearly three years of aggressive monetary easing.


Write to Sarka Halas at sarka.halas@wsj.com

This article originally appeared at TradeQQ.

 

Advertisements