Dow Futures Gain Ahead of Q1 Earnings Kick-Off: China Trade Data Boosts Sentiment

JPMorgan kicks-off the first quarter earnings season Tuesday, but near-term forecasts will likely dictate sentiment as investors look to when, and how, the U.S. economy will ultimately roar back to life.

The Tuesday Market Minute

  • Global stocks gain as better-than-expected China trade data boosts Asia markets and slowing coronavirus infection rates boosts sentiment.
  • China exports fall 6.6% in March, topping forecasts of a 10% slump, as factors crawl back to life following February's unprecedented shutdown.
  • Coronavirus death rates in Europe are starting to slow, although Britain's lockdown is likely to continue for at least another month.
  • President Donald Trump insists his authority to re-open the U.S. economy is "total", but two coalitions of governors are looking to put their own plans in place.
  • U.S. equity futures suggest a solid open on Wall Street ahead of earnings from JPMorgan, Johnson & Johnson and Wells Fargo.

Wall Street futures jumped higher Tuesday, while global stocks rallied and the dollar weakened, as investors were cheered by better-than-expected trade data from China and further data suggesting the global coronavirus pandemic may be nearing its peak.

China's industrial machine continued to sputter over the month of March, as its factories crawled back to full speed following February shutdowns, with exports falling 6.6% from the dame period last year, according to official customs data. The slump, however, was far better than feared and a significant improvement on the 17% collapse recorded over the first two months of the year.

The reading offered yet another signal of burgeoning improvements in the Asia region, where new coronavirus infection rates have slowed considerably, and filtered through into the trading day in Europe, where officials are also suggesting that COVID-19 data points to a flattening of the curve in major economies on the Continent. 

Britain continues to suffer higher rates if infection and mortality and will extend its unprecedented lockdown for at least another month.

President Donald Trump has also weighed-in on the U.S. plan to re-open the world's largest economy during his regular press briefing, while governors in ten states, including New York and California, announced the formation of regional pacts to co-ordinate business re-starts and ease guidelines on social distancing. 

On Wall Street, a weaker U.S. dollar is likely to support export stocks throughout the trading session, although sentiment is likely to be dominated by a series of blue-chip earnings reports, including first quarter profits and forecasts from JPMorgan  (JPM) - Get Report, Johnson & Johnson  (JNJ) - Get Report, Goldman Sachs  (GS) - Get Report and Wells Fargo  (WFC) - Get Report.

Collectively, S&P 500 earnings are expected to decline 9% from the same period last year, according to Refinitv estimates, to a share-weighted $285.5 billion. 

The bottom line for America's biggest companies is then set to slump another 20.7% over the second quarter amid the bulk of stay-at-home orders and shutdowns across the world's biggest economy.

JPMorgan posted notably weaker first quarter earnings Tuesday as coronavirus-related charges trimmed the bottom line of the biggest U.S. lender, while Johnson & Johnson posted stronger-than-expected profits, while boosting its dividend, even as it trimmed its full-year guidance amid coronavirus uncertainty.

Tuesday's open, however, is likely to be solid, with contracts tied to the Dow Jones Industrial Average indicating a 420 point bounce higher and those linked to the S&P 500 suggesting a 51 point advance for the broader benchmark. 

The U.S. dollar index, which tracks the greenback against a basket of six global currency peers,was marked 0.05% lower at 98.305 in early European trading, extending its one-month decline to around 4.33%.

The dollar weakness wasn't able to support oil markets, however, which continued to shrug-off the impact of Sunday's historic OPEC production cut agreement, which will take nearly 10 million barrels from the market each day starting next month, and failed to react to the stronger-than-expected China trade data. 

Brent crude futures contracts for June delivery, the benchmark reference for around 60% of global crude purchases, were last seen 12 cents lower from their Monday closing price in New York and changing hands at $31.62 per barrel in early European trading.

WTI crude futures for May delivery, which are more tightly connected to domestic gas prices, were marked 38 cents lower at $22.03 per barrel.

European stocks held onto early gains in the opening hours of trading in Frankfurt, with the trade-sensitive DAX index rising 1.05% and helping lift the region-wide Stoxx 600 to a 0.8% gain. Britain's FTSE 100, however, slumped 0.52% as the pound climbed to 1.2556 against a softer U.S. dollar and energy stocks retreated in the face of crude's tepid price performance. 

Overnight in Asia, Japan's Nikkei 225 raced 3.13% higher to close at a March 10 high of 19,638.81 points while the region-wide MSCI ex-Japan benchmark gained 1.2%.