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Dow Futures Resume Gains As May US Jobs Shock Primes Global Stocks; Oil Rises on OPEC Cuts Extension

The S&P 500 is riding a 23.6% second quarter rally that has the broadest measure of U.S. stocks nearing break-even for the year.

The Monday Market Minute

  • Global stocks mixed as Asia rides Friday's Wall Street rally to three-month highs, while Europe retreats following uneven China trade data.
  • China's May trade surplus hits a record high $62.93 billion, but a mild drop in exports belies a worrying 16.7% plunge in imports.
  • Benchmark 10-year Treasury note yields remain over 0.9% following Friday's 2.5 million jobs shock as investors await the Fed's reply later this week.
  • Global oil prices gain as OPEC members, as well as Russia and Mexico, agree to extend their record output cuts until the end of July.
  • U.S. equity futures suggest a firmer open for Wall Street as the S&P 500 flirts with break-even for the year and the Dow heads for 28,000.

U.S. equity futures bumped higher Monday, following on from Friday's jobs-related surge that lifted benchmarks to the highest levels since early March, as investors parsed uneven trade data from China and await the Federal Reserve's response to last week's employment report.

The the S&P 500 now just 1.1% from break-even for the year, and the Dow Jones Industrial Average firmly past the 27,000 mark, investors appeared reluctant to boost stocks further in the early Monday session heading into a light week for corporate earnings and economic data highlighted by the Fed's two-day policy meeting which ends on Wednesday.

A surprise -- albeit modest -- 3.3% decline in China exports over the month of May also kept risk markets in check as data from Customs officials published Sunday indicated an uneven trade recovery for the world's second-largest economy

Still, Friday's payroll reading, which some Wall Street analysts have called the most shocking in history, provided the strongest indication yet of a V-shaped recovery from the coronavirus downturn with the addition of a net new 2.5 million jobs last month and an improving headline unemployment rate of 13.3%.

While the economy still needs to bring back at tens of millions of workers to regain the pace of hiring seen prior to the pandemic, improving U.S. infection rates, increased testing and the steady re-opening of states and cities around the country suggests pent-up activity is ready to roll in the months ahead. 

U.S. equity futures look cautious heading into the week, however, with contracts tied to the Dow indicating a 225 point gain and those linked to the S&P 500 suggesting a 15 point bump to the upside at the opening bell.

Benchmark 10-year U.S. Treasury bond yields, which retreated to a multi-week high of 0.956% amid Friday's rally, were trading at around 0.92% in early European dealing as the U.S. dollar index eased 0.1% against a basket of six global currencies to 96.839.

European stocks pulled back from Friday's three-month highs as investors took profits from a solid rally which has lifted the Stoxx 600 benchmark, the region's broadest measure of share prices, some 16.8% so far this quarter as the European Commission pushes its €750 billion rescue fund forward and the ECB expands its coronavirus QE program to €1.35 trillion.

The Stoxx 600 was marked 0.13% lower in early Monday trading, lead by a 0.05% decline for the DAX, while Britain's FTSE 100 was 0.13% higher at 6,500 points during by mid-day trading in London. boosted by solid gains for oil majors such as Shell and BP.

Global oil prices edged higher ahead of a virtual press conference with OPEC leaders in Vienna later this morning that will outline the cartel's agreement with non-member allies including Russia and Mexico to extend their 9.7 million barrel per day production cut agreement through to the end of July. 

WTI contracts for July delivery were marked 26 cents higher from their Friday close in New York and changing hands at $39.81 per barrel while Brent contracts for August, the global benchmark, were seen 52 cents higher at $42.82 per barrel.

The moves also provided solid support for U.S. oil majors in pre-market trading, with Exxon Mobil Corp XOM rising 4.84% to $55.65 each and domestic rival Chevron Corp CVX marked 3.1% higher at $103.90 each.

Collectively, the two Dow components will add around 40 points to the 30-stock benchmark at the opening bell and have gained 77% and 91% respectively since their March 23 lows.

Overnight in Asia, Japan's Nikkei 225 notched its sixth consecutive session gain as investors rode Friday's rally on Wall Street to take the benchmark past the 23,000 point mark for the first time since February 25.

The region-wide MSCI ex-Japan index, meanwhile, rose 0.33% heading into the final hours of trading paced by solid gains in Singapore and Shanghai.