Dow Futures Point to Fresh Record Highs as Global Markets Rally Amid Easing U.S.-Iran Tensions

Wall Street is set for fresh record highs Thursday as investors return to risk markets following the quick de-escalation of military tensions in the Gulf region and conciliatory comments from President Donald Trump.

The Thursday Market Minute

  • Global stocks rally as the U.S. and Iran suggest a quick de-escalation of military tensions following the killing of Major-General Qassem Soleimani last week.
  • Investor focus shifts to U.S.-China trade talks and the signing of the phase one agreement next week in Washington.
  • European stocks open at a fresh record high, following on from solid gains in Asia, as investors dump safe-haven assets in markets around the world. 
  • Global oil prices steady after yesterday's sharp retreat to levels seen prior to the Soleimani killing on January 3.
  • U.S. equity futures suggest fresh record highs on Wall Street Thursday ahead of initial jobless claims at 8:30 am Eastern time.

President Donald Trump's address to the nation Wednesday, during which he signaled a preference for dealing with Iran through negotiation and sanctions as opposed to military force following the killing of Major-General Qaseem Soleiman on January 3 and Iran's reprisal missile strikes earlier this week, triggered a spike in U.S. and world stocks and sharp retreat in global oil prices.

"Our great American forces are prepared for anything," Trump said. "Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world," 

“The United States is ready to embrace peace with all who seek it," he added. 

With Iran appearing to suggest its reprisal attacks on American targets for Soleimani's killing have "concluded", investors focus shifted overnight to the state of U.S.-China trade relations and the planned signing of a phase one agreement next week in Washington.

China's Vice Premier, Liu He, is set to travel to the capital on January 13 for the signing, which commits the U.S. to rolling back tariffs on China-made goods while Beijing dramatically increases the amount of agricultural products it buys from American farmers. 

With headline risk abating and Friday's December employment report -- from which analysts expect a 266,000 increase in net new jobs for the U.S. economy -- looming, Wall Street looks set to extend last night's rally at the opening bell Thursday.

Contracts tied to the Dow Jones Industrial Average are indicating a 175 point gain a move that would take the 30-stock benchmark to a fresh record high. Futures linked to the S&P 500, meanwhile, suggest an 18.5 point advance, which would also be a new all-time peak for the broadest measure of U.S. stocks.

Improved risk sentiment also boosted the U.S. dollar index in overnight trading, as the safe-haven yen slipped to a two-week low and Treasury bond yields -- which move in the opposite direction of prices -- rose to 1.872%, some 17 basis points higher than levels seen prior to Soleimani's killing on January 3.

European stocks also opened with a solid bullish tone, with the Stoxx 600 rising 0.64% to a fresh record high of 421.02 points in Frankfurt as basic resource and auto stocks paced gains, while Britain's FTSE 100 added 0.47% by mid-day trading in London. 

Overnight in Asia, the weaker yen helped boost export-focused stocks on the Nikkei 225, which gained 2.31% on the session to close at 23,739.87 points, while the region-wide MSCI ex-Japan benchmark was seen 1.4% higher heading into the final hours of trading.

Global oil prices, which slumped more than 4% in a volatile session yesterday, triggered by both the de-escalation of military tensions in the Gulf and data showing a surprise 1.4 million barrel increase in domestic crude stocks, were steady in overnight trading, but have moved back to levels seen prior to the Soleimani killing last week.

Brent crude futures contracts for March delivery, the global benchmark for pricing, were last see seen 2 cents higher from their Wednesday close in New York and trading at $65.46 per barrel, while WTI contracts for February, which are more tightly-linked to U.S gasoline prices, were marked 11 cents higher at $59.72 per barrel.