The Thursday Market Minute
- Global stocks mixed as China trade data encourages bulls, but tensions between Washington and Beijing cap gains.
- China posts April trade surplus of $45.3 billion as exports rebound.
- President Trump says he'll look at China's commitment to phase one trade deal soon, with analysts skeptical that Beijing can add $200 billion in U.S. purchases over the next two years.
- U.S. Treasury bond yields rise as investors prep for first $100 billion in supply next week as government plans to borrowing a staggering $3 trillion over the second quarter.
- Weekly jobless claims fall to 3.169 million, four-week average at 4.173 million.
- Bank of England warns U.K. economy could contract by 14% this year, the direst warning in its 300-year history.
- Wall Street futures suggest another higher open ahead of before-the-bell earnings from Bristol-Myers and Raytheon and weekly jobless claims at 8:30 am Eastern time.
U.S. equity futures suggest a solid open on Wall Street Thursday as investors cheered an unexpected surge in China trade data, even amid concerns for the fate of its phase one agreement with Washington amid renewed tensions with the White House.
Stocks pared some early gains, however, after a larger-than-expected weekly jobless claims reading that showed 3.169 million more Americans filed for unemployment benefits last week, taking the six week total to around 33 million. The continuous claims number, a solid proxy for the April job loss number tomorrow, was pegged at 22.65 million.
China's April exports rose by just 3.5% last month, against a 14.2% decline in exports, as factories returned to full speed following weeks of coronavirus-triggered shutdowns. The stronger-than-expected readings boosted China's global trade surplus to $45.3 billion, and boosted stocks in Europe and Asia in overnight dealing.
The figures, particularly China's $22.9 billion surplus with the U.S. may also pique the interest of President Donald Trump, who told reporters in Washington last night that he'll "be able to report in about a week or two" as to whether China is adhering to phase one trade deal commitments, which call for a $200 billion increase in purchases of U.S.-made goods and could "terminate" the deal if they don't.
"They understand they have a deal and hopefully they're going to get with the deal and we'll see. They may. They may not. We're going to find out," the President added.
With the prospect of a fresh trade dispute, just as the global economy is attempting to extract itself from the fastest and steepest contraction on record, and the White House renewing its criticism of Beijing's handling of the coronavirus outbreak, investors are also worried that U.S.-China tensions could scupper Wall Street's six-week rally.
Still, at least for the moment, futures prices are indicating a solid open for Thursday, with contracts tied to the Dow Jones Industrial Average suggesting a 255 point gain and those linked to the S&P 500, which has risen 27.3% since March 23, guiding to a 33 point advance.
Another challenge to Wall Street's bullish tone could come from the bond market, where benchmark 10-year Treasury note yields have risen to a multi-week high of 0.711% ahead of next week's $96 billion in debt sales that form part of the government's staggering $3 trillion in second quarter borrowing to pay for myriad coronavirus stimulus and rescue plans.
The moves in Treasuries, as well as the anticipated supply, have added to gains for the U.S. dollar index, which benchmark's the greenback against six global peers, as it gained 0.1% to 100.17.
European stocks, though, posted solid early gains as the euro drifted to 1.0795 against the dollar and investors focused on the surprise strength of China trade data.
The Stoxx 600 was marked 0.9% higher in mid-day dealing, lead by a 1.1% gain for the trade-sensitive DAX index, while Britain's FTSE 100 rose 0.9% even as the Bank of England warned that U.K. GDP could contract by as much as 14% this year, its most dire prediction in nearly 300 years.
Global oil prices spiked higher heading into the start of the U.S. session, with WTI futures rising $2.40 from last night's close to trade at $26.39 per barrel after Energy Department yesterday showed a smaller-than-expected domestic crude stock increase of 4.6 million barrels last week.
Brent crude futures were last seen $1.95 higher at $31.67 following a two-week rally that has lifted the global benchmark nearly 90% as OPEC members begin cutting production and investors bet on a faster re-opening of major economies around the world.
Overnight in Asia, Japan's Nikkei 225 returned for its first trading day since the start of the traditional May holiday festival last Friday with a paltry 0.28% gain that lifted the index to 19,674.77 points, while the region-wide MSCI ex-Japan benchmark slipped 0.3% lower thanks to weaker closing levels in Hong Kong and Shanghai.