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Dow Futures Gain Following Report of Potential December U.S.-China Tariff Delay

Wall Street futures rebounded Tuesday after the Wall Street Journal reported that the U.S. and China could agree to delay tariffs scheduled to kick-in on December 15.

The Tuesday Market Minute

  • Wall Street futures indicate modest opening bell gains following a Wall Street Journal report, with the Dow called 30 points to the upside.
  • Asia shares edge lower after data from China shows consumer inflation at an 8-year high amid surging pork prices, but little change in factory gate inflation as manufacturing remains subdued by trade tariffs. 
  • European shares open weaker as markets look for trade direction, while Deutsche Bank shares gain after ECB officials trim capital requirement limits.
  • Oil prices drift after last week's OPEC-led rally, with production cuts holding U.S. crude near the $60 per barrel mark ahead of API data on weekly inventories.

U.S. equity futures swung sharply into positive territory Tuesday after the Wall Street Journal reported that negotiators for both the U.S. and China are working towards an agreement that could delay $160 billion in tariffs set to kick in on December 15.

The report reversed earlier declines on Wall Street as investors keyed on the start of today's Federal Reserve policy meeting while monitoring developments in the slow-moving trade talks between Washington and Beijing.

Contracts tied to the Dow Jones Industrial Average, which had suggested a decline of as much as 160 points earlier in the session, now point to a 32 point gain for the benchmark while those linked to the S&P 500, which has gained 25.1% so far this year, are poised for a 4 point bump to the upside.

Markets were also boosted by a statement from House Speaker Nancy Pelosi, who will make an announcement linked to the re-worked NAFTA agreemetn at 10:00 am Eastern Time.

With a December 15 deadline for fresh tariffs on China-made goods looming, and investors and fund managers sitting on solid year-to-date gains across a broad range of assets, overnight trading suggested little desire to reach for further risks ahead of the Fed's assessment in U.S. growth on Wednesday and absent any significant movement in the current U.S.-China trade standstill.

Movement, in fact, appears to be exactly what President Donald Trump is looking for from Beijing in order to make any decision on the December 15 tariff plans, which would apply to a range of China-made consumer goods -- including mobile phones and children's toy -- worth nearly $160 billion.

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"I don't think the President wants to implement these new tariffs, but there has got to be some movement on their part to encourage him not to do that," U.S. Agriculture Secretary Sonny Perdue told reporters at an agriculture industry conference in Indianapolis late Monday.

The U.S. dollar index was modestly lower against a basket of its global currency peers, drifting to 97.56 as 2-year Treasury bond yields dipped to 1.601% ahead of a Fed rate decision that is almost certain to include no changes to benchmark lending rates. 

European stocks trimmed losses in early afternoon trading following the Journal report, with the Stoxx 600 now 0.6% lower while Britain's FTSE 100 shed 0.55% as the pound held at a near three-year high of 1.3177 against the U.S. dollar ahead of Thursday's general election that polls continue to suggest will delivery a Conservative Party majority. 

Overnight in Asia, stocks were mixed in a tepid session highlight by inflation data from China, which showed consumer prices accelerating to a near eight-year high of 4.5%, largely the result of a surge in pork prices, while factory gate inflation remained subdued amid the ongoing uncertainty in the region's manufacturing sector. 

The MSCI Asia ex-Japan index, the broadest measure of regional share prices, slipped 0.16% heading into the final hours of trading while Japan's Nikkei 225 was essentially unchanged, shedding just 0.09% to close to 23,410.19 points in Tokyo.

Global oil prices were equally dull, with traders now eyeing today's reading on U.S. crude inventories from the American Petroleum Institute in order to a get a better handle on world demand, which is likely to be the principal near-term market driver now that the OPEC decision on production cuts -- which were extended by 500,000 barrels per day last week to 1.7 million -- has come and gone.

Brent crude contracts for February delivery, the global benchmark, were seen 19 cents lower from their Monday close and trading at $64.08 per barrel, while WTI contracts for the same month were marked 14 cents lower at $58.88 per barrel.