Futures trim losses after data; Dow futures still off triple digits

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U.S. stock index futures pointed to a sharply lower open on Wednesday, weighed by declines in oil prices, continued concerns about China and fresh geopolitical worries from news out of North Korea.

Dow futures fell 300 points just before 8 a.m., ET, and traded about 280 points lower after morning data reports.

The U.S. November trade deficit came in at $42.4 billion. The December ADP report showed creation of 257,000 payrolls.

Treasury yields edged off lows, with the 2-year yield briefly turning higher to top 1 percent and the 10-year yield around 2.20 percent as of 8:40 a.m., ET.

In currency markets, the U.S. dollar held a touch higher against major world currencies. The euro traded near $1.074 and the yen was at 118.54 yen against the greenback.

Overnight, the Chinese yuan plunged to a five-year low in offshore trading, sharply widening the gap with the mainland-traded yuan.

The headline Caixin China General Services PMI for December was 50.2, down 1 point from November and the lowest in 17 months, according to Markit.

Federal Reserve Vice Chairman Stanley Fischer said Wednesday morning in an interview on CNBC that North Korea's claim to have successfully tested a hydrogen bomb has increased uncertainty in the markets. He added, however, that he's unsure of the long-term impact.

Fischer said concerns about a slowdown in China's economy are perhaps more significant.

He said estimates of four hikes this year are "numbers in the ballpark."

The U.S. weekly crude oil inventories report, out at 10:30 a.m. ET, will be eyed closely and could impact prices on Wednesday.

Brent crude oil traded around an 11-year low Wednesday morning. Brent and U.S. light crude futures for February delivery traded below $35 per barrel early on Wednesday, sharply lower on the day.

Shares in oil majors such as BP, Total and Royal Dutch Shell declined in European trade on Wednesday as a result of the energy price declines.

A BP employee uses ultrasound to scan a section of pipe along an oil transit pipeline at Prudhoe Bay oil field on Alaska's North Slope.
Al Grillo | AP
A BP employee uses ultrasound to scan a section of pipe along an oil transit pipeline at Prudhoe Bay oil field on Alaska's North Slope.

South Korean, Japanese and European shares traded lower in general after North Korea announced that it had tested a hydrogen bomb overnight. This followed reports of a 5.1-magnitude earthquake near a nuclear-testing site in the country. North Korea has said that it would not relinquish its nuclear capabilities unless the U.S. drops its hostile foreign policy.

Increased tensions between Saudi Arabia and Iran are also in focus after the former country cut diplomatic ties with the latter. On Tuesday, the Saudi foreign minister stoked the dispute, telling CNBC that "Iranians have got away with murder, literally, for more than 30 years."

Monsanto will post quarterly earnings on Wednesday. The major economic data due is the non-manufacturing services report for December, but there will also be November's trade report and durable goods orders.

In addition, the minutes from December's interest rate-raising meeting of the Federal Reserve will garner attention when they are published at 2 p.m. ET.

"It remains to be seen whether they provide a great deal more information than (U.S. Federal Reserve Chair Janet) Yellen offered in the press conference, to give greater clarity as to whether the Fed will stick or twist again with another rate hike this quarter," Chris Scicluna, head of economic research at Daiwa Capital Markets, said in a note on Wednesday.

Apple shares traded 2.5 percent lower in extended hours trade after a media report on Tuesday suggested the tech giant might slash its production of iPhone 6S and 6S Plus output.