US equity futures rebounded from a poor start, which saw the E-mini initially tumble 1% early in the overnight session, then rise as much as 0.6% in yet another illiquid session boosted by Trump's latest attempt to talk up markets after an apparent de-escalation in tensions between the president and the Fed chair and Treasury Secretary. Earlier, Asian stocks outside of Japan dropped 0.2% to a two-month lows catching down to Monday's US market rout, while Europe was mostly closed for trading.

S&P 500 contracts gained 0.6% as of 7 am ET after falling as much as 1.1 percent earlier. Futures on the Nasdaq 100 Index and the Dow Jones Industrial Average advanced 0.4 percent and 0.5 percent, respectively. With the S&P closing on the edge of a bear market, traders will be looking for confirmation of more liquidation selling or else an attempt at lifting stocks from massively oversold levels.

Trump’s latest reversal and expression of confidence in the Treasury secretary, Fed chair Powell and the economy on Tuesday helped to modestly calm markets, which were roiled after Bloomberg reported that the president had discussed firing the central bank’s chairman over raising interest rates, while Mnuchin was also in danger of losing his job should stocks continue to slide.

As reported last night, Trump called Mnuchin a "very talented guy, very smart person" and also said that the central bank is "raising interest rates too fast” but he has “confidence” that the Fed will “get it pretty soon.” Separately, CNN reported that Mnuchin spoke by phone with Trump several times over the weekend and also after a brutal Christmas Eve trading day.

Commenting on the market rout, Steve Englander, head of global G-10 FX for Standard Chartered Bank said that "markets have pretty much made up their minds on how jumpy they want to be - very. The question is what is the primary driver of the jumpiness - economic concerns, Fed policy, Trump-Fed conflict, slowing of global growth? Nothing is particularly encouraging right now."

Earlier in the session, the MSCI index of Asia-Pacific shares ex-Japan slipped 0.5 percent, dropping to a two-month low, with the Shanghai Composite losing 0.4% while the CSI 300 Index slumped -0.5%, its lowest close since March 2016 and the ChiNext Index of small caps dropped -0.7%; South Korea’s KOSPI shed 1.6%.

Japan’s Nikkei, which crashed 1000 points, or 5% the previous day and also entered a bear market, had a volatile session. It swerved in and out of the red, falling more than 1% to a 20-month-low at one stage, before ending the day with a gain of 0.9% as yet another plunge protection team appears to have been activated. Japan’s Topix index closed 1.1% higher after surging as much as 2% earlier on Wednesday. This came after a 4.9% plunge on Christmas Day

Top Asian News

• Goldman Sachs Gets Nod From Mori for Bond After SMBC Nikko Cut
• Japan’s 10-Year Bond Yield Touches Zero Percent as Stocks Sink
• Global Stock Angst Snowballs as Nikkei 225 Enters Bear Market
• Bleak Year for India Company Bond Sales Ends on Signs of Rebound

Markets in Britain, Germany, and France remained closed on Wednesday.

Top European News

• Shell’s Prelude LNG Project in Australia Starts Gas Output
• Coal Seen Down But Not Out in 2019 as Ex-China Supply Recedes
• Gold Powers to Six-Month High as Turmoil Fires Up Haven Demand
• Turkey May Import Up to 300K Tons Sunflower Seed With Zero Duty

Emerging-market stocks headed for their longest losing streak since October as concern of further turmoil in the U.S. kept global investors on tenterhooks.

Despite Wednesday's modest rebound, comments from strategists were downright apocalyptic:

• "In addition to concerns toward the U.S. economy, the markets are now having to grapple with growing turmoil in the White House which has raised political risk ahead of the year-end,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
• "In the end, we believe that the Fed is the only presence capable of ending the current confusion in the markets,” said Kenta Inoue, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.  “The White House will probably keep making gestures intended to halt the rout in stocks, but the federal government is likely to remain shut into the new year. The U.S.-China trade war also shows no signs of a resolution.”
• "It is very unusual that the bias among the market participants is to the downside during this time of the year, and there’s not a lot of time to fix that,” said Walter “Bucky” Hellwig, a senior vice president at BB&T Wealth Management. "I am not a trader but I checked the futures three times on Sunday and am watching the futures on a Christmas evening as well -- when you get moves like this you just can’t ignore them."
• "We are in the middle of the worst storm in global financial markets since the 2008 crisis, with markets crashing from New York to Tokyo," said Bernd Berg, global macro and FX strategist at Woodman Asset Management. "As global central banks are unlikely to come to the rescue this time around, the global market crash might continue well into next year."

• “As far as the futures are suggesting, the market is indecisive right now,” said Jingyi Pan, market strategist at IG Asia Pte. “The rather empty calendar and empty desks post-Christmas could mean that there may be little to arrest the fall should it unfold,” she said.

• "These are incredibly tricky markets to decipher as the outsized moves are not reflective of the current U.S. economic landscape,” said Stephen Innes, the head of trading for Asia-Pacific at Oanda Corp. in Singapore. “But that seems to matter little so far as fear mongering continues to permeate every pocket of global capital markets.”

Elsewhere, US Treasury yields declined amid the rout, including a steep sell-off in oil, prompted investors to move into safe-haven government debt with the 2Y Treasury yield flash crashing ahead of the close on Monday amid a furious last minute short squeeze, adding to the growing pressure on the dollar. The 10-year U.S. Treasury note yield extended its fall to touch 2.722 percent, its lowest since early April.

In currencies, the dollar traded at 110.35 yen after retreating to a four-month low of 110.00 overnight against its Japanese peer, which tends to attract demand as a perceived safe-haven during times of market volatility and economic stress.

Bloomberg Dollar Spot Index initially edged lower in Asian morning before trading sharply higher as a skeleton crew of US traders walked in to their trading desks. Sterling advanced versus dollar, with cable rising back above 1.27 as of 5:15 pm Tokyo. The euro was 0.15 percent higher at $1.1412. The ruble declined most among peers as Brent crude lingered near $50 a barrel

In commodities, U.S. crude futures were up 0.4 percent at $42.70 per barrel after tumbling 6.7 percent on Monday.  U.S. crude futures plunged to the lowest level since June 2017 on Monday, as bearish stocks added to fears of an economic slowdown. Brent crude futures were down 0.18 percent at $50.38 a barrel, having skidded 6.2 percent in the previous session to their weakest since August 2017.

Safe-haven gold was well bid, with spot prices brushing a six-month peak of $1,272.83 per ounce.

Expected economic events include the Richmond Fed Manufacturing Survey. No major companies are reporting.

Market Snapshot

• S&P 500 futures up 0.5% to 2,353.75
• STOXX Europe 600 down 0.4% to 335.24 on Dec. 24.
• MXAP up 0.2% to 142.50
• MXAPJ down 0.2% to 468.36
• Nikkei up 0.9% to 19,327.06
• Topix up 1.1% to 1,431.47
• Hang Seng Index down 0.4% to 25,651.38
• Shanghai Composite down 0.3% to 2,498.29
• Sensex up 0.4% to 35,626.47
• Australia S&P/ASX 200 up 0.5% to 5,493.80
• Kospi down 1.3% to 2,028.01
• Euro down 0.02% to $1.1390
• Brent Futures up 1.1% to $51.00/bbl
• Gold spot up 0.3% to $1,272.61
• U.S. Dollar Index up 0.2% to 96.73

Top Overnight News

• U.S. stock-index futures whipsawed between losses and gains, as investors assessed comments from President Donald Trump that he was confident in Treasury Secretary Steve Mnuchin and the American economy while the benchmark index sat at the edge of plunging into bear market territory
• President Trump’s frustration with Mnuchin is ratcheting up after his attempts to calm Wall Street failed, CNN reported, citing a source close to the White House.
• Japanese stocks rose for the first time in six days as electronics makers staged a rebound after the Nikkei 225 Stock Average tumbled into a bear market on Tuesday
• Bank of Japan Governor Haruhiko Kuroda said growing overseas economic risks and recent market volatility are precisely the kind of circumstances that call for sticking with powerful and sustainable stimulus
• Oil in London fell below $50 a barrel for the first time since July 2017 as broader financial market turmoil and worries over U.S. supply countered signals from the OPEC+ coalition that it may extend or deepen output cuts
• Gold is rallying into the end of 2018 as turmoil in global equities, the partial U.S. government shutdown and concerns about the outlook for next year stoke demand, lifting prices to the highest in six months

US Event Calendar

• 9am: S&P CoreLogic CS 20-City YoY NSA, est. 4.8%, prior 5.15%; MoM SA, est. 0.3%, prior 0.33%
• 10am: Richmond Fed Manufact. Index, est. 15, prior 14