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Dow Futures Pare Gains As Trump Disputes Report on China Tariff Rollback

Global stocks rally, setting up fresh record highs for Wall Street, as investors cheer fading headline risks following reports of a near-term U.S.-China trade pact and a resounding result from last night's U.K. elections.

The Friday Market Minute

  • Global stocks rally an fresh U.S.-China trade hopes, with risk sentiment getting a further boost from last night's election win for Prime Minister Boris Johnson.
  • Reports suggest President Trump is ready to suspend the December 15 tariff round, and roll back others, in exchange for a $50 billion agricultural purchase commitment from Beijing.
  • Britain's Conservative Party wipes out its Labour opposition in last night's general election, winning the biggest Parliamentary majority since 1987. 
  • The U.K. pound hits a near three-year peak overnight, pushing the U.S. dollar lower in fast-moving currency markets.
  • Oil prices extend gains on U.S.-China trade hopes, pushing domestic crude prices near the $60 per barrel mark.
  • Wall Street futures pare gains after Trump disputes WSJ tariff story and November retail sales come in weaker than expected.

U.S. equity futures pared gains Friday, pulling Wall Street's three major benchmarks back from record highs, as investors trimmed bets a near-term trade agreement between Washington and Beijing.

Multiple media reports, first published by the Wall Street Journal, now suggest that President Donald Trump is prepared to suspend tariffs on China-made goods set to kick in on December 15, and roll back levies put in place over the past 18 months, in exchange for a $50 billion agricultural purchase commitment that would form the so-called phase one trade agreement. 

Trump, however, disputed that version of the narrative in a late-morning Tweet.

China's Foreign Ministry spokeswoman Hua Chunying would only say Friday that the government was committed to solving the ongoing trade issues in a "mutually beneficial" way, and no official word on details of the offer have emerged from the White House, but investors appear eager to bet the agreement could mark a notable thaw in the damaging trade dispute between the world's two biggest economies.

China's Commerce Ministry, however, said it would hold a press briefing -- but didn't disclose what the subject would be -- at 9:30 am Eastern time.

Trump's Tweet, as well as weaker-than-expected November retail sales data in the U.S., which rose 0.2% against economists forecast of a 0.5% advance, pushed contracts tied to the Dow Jones Industrial Average to indicate a 25 point pullback while those linked to the S&P 500 are pricing in a 3 point retreat for the broader benchmark.

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 Risk sentiment in Europe, however, was buttressed by last night's resounding victory for incumbent Prime Minister Boris Johnson's Conservative Party, which looks on pace to win a commanding 37-seat majority in the House of Commons, the biggest since Margaret Thatcher's third election triumph in 1987.

Johnson now has the Parliamentary support to push through his Brexit legislation, which has been stalled for much of the past two years, allowing Britain to formally leave the European Union as early as next month.

In Britain, the pound slipped from the highest levels in nearly three years following Johnson's overwhelming election victory to trade at 1.3331, pushing the export-focused FTSE 100 1.8% higher in mid-day London trading. 

Broader European stocks, however, returned to four-and-a-half year highs with a 1.7% mid-day gain, led by a 1.22% advance for the trade-sensitive DAX performance index in Germany.

Overnight in Asia, Japan's Nikkei 225 followed Wall Street's record rally with a 2.55% gain that boosted the index to a 14-month high of 24,023.10 points while the region-wide MSCI Asia ex-Japan benchmark added 1.5% to trade at the highest levels in eight months.

Global oil prices were also on the rise, boosted by both renewed demand hopes from a U.S.-China trade deal and a weaker U.S. dollar, both of which lifted U.S. crude prices closer to the $60 per barrel mark.

Brent crude contracts for February delivery, the global benchmark, were seen 96 cents higher from their Thursday close and trading at $65.16 per barrel, while WTI contracts for January delivery were marked 70 cents higher at $59.88 per barrel.