The Tuesday Market Minute
- Global stocks shrug-off U.S.-China tensions with bets on tax cuts and extended stimulus, boosting major markets around the world.
- President Donald Trump says he's 'seriously considering' a capital gains tax cut as U.S. lawmakers attempt to re-start talks aimed at agreeing a new stimulus package for the world's biggest economy.
- Russia said it has officially registered a coronavirus vaccine, but WHO says 'rigorous' review needed to qualification.
- China reports a 16.4% surge in July car sales, lifting European automakers and pushing regional stocks higher, but tensions between Washington and Beijing keep investors close to safe-haven assets.
- Oil prices rally on stimulus hopes, a modestly weaker dollar and Saudi Aramco's bullish second half outlook, lifting Brent crude prices past $45 per barrel.
- U.S. equity futures suggest a firmer open on Wall Street ahead of factory gate inflation data at 8:30 am Eastern time.
U.S. equity futures traded firmly higher Tuesday, lifting the S&P 500 back to withing striking distance of its all-time highs from earlier this year, as investors reacted to the hint of cut in capital gains taxes and the hope of a breakthrough on coronavirus stimulus talks in Washington.
President Donald Trump told reporters during a White House briefing late Monday that he was "considering a capital gains tax cut, which would create a lot more jobs" as part of his administration's effort to revive the stalling economy. Analysts suggest he's likely to favor the indexing of capital gains to inflation, through an Executive Order, but note it would also likely be challenged by Democratic lawmakers in court.
The President's suggestion comes as Congress attempts to restart negotiations on a coronavirus relief bill that would replace, in part, the $600 per week emergency unemployment payment that expired in July. Talks aimed at bridging the gap between the Democrat's $3.4 trillion HEROES Act, and a $1 trillion counter-offer from Republicans, collapsed late last week.
Global markets were also supported by news that Russia had registered the first official coronavirus vaccine, which President Vladimir Putin said had been given to one of his daughters.
U.S. stocks are also getting a lift from a two-day rally in oil prices, sparked by stronger-than-expected industrial data from China over the weekend, and a 16.4% year-on-year surge in car sales in China, the world's biggest market, that adds to signals of a broader recovery in the world's second-largest economy.
Wall Street futures suggest a robust start to the Tuesday session as a result, with contracts tied to the Dow Jones Industrial Average -- which is riding a seven-day winning streak -- priced for a 330 point opening bell gain, a move that would lift the 30-stocks average firmly past the 28,000 point mark.
Contracts tied to the S&P 500, meanwhile, suggest a 19 point opening bell gain that would take the broader benchmark to within around 15 points of the all-time high it reached on February 19.
The Nasdaq Composite. however, is priced for a modest 8 point pullback.
Oil prices, meanwhile, continued to climb on both hopes for a Congressional breakthrough on stimulus and the robust outlook for crude demand outlined by Saudi Aramco, the world's biggest producer, earlier this week.
WTI contracts for September delivery, the U.S. benchmark, 53 cents higher from their Monday close in New York and were changing hands at $42.47 per barrel in early European dealing while Brent contracts for October, the new global benchmark, were seen 37 cents higher at $45.36 per barrel.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.2% lower on the session at 93.353 while benchmark 10-year Treasury note yields rose 2 basis points to trade at 0.599% amid the improving market sentiment and $112 billion in new bond sales expected this week from the Treasury.
European stocks were looking at solid early gains in London and Frankfurt, with automakers and oil majors leading the gains. The region-wide Stoxx 600 in Frankfurt was marked 1.76% higher in early trading, while the FTSE 100 added nearly 2% despite data showing some of the worst job losses in a decade for the region's third-largest economy over the second quarter.
Germany's DAX index, meanwhile, surged 2.6%, and past the 13,000 point mark, following a better-than-expected reading of investor confidence from the closely-watched ZEW survey.
Overnight in Asia, U.S.-China tensions pushed domestic stocks into the red, with Beijing hitting back at a move by Washington to de-list China stocks on U.S. exchanges that don't comply with accepted accounting standards with a lift of sanctions against, among others, six Republican lawmakers.
China's Shanghai Composite fell 1.15% on the session, offsetting gains in Hong Kong and South Korea and keeping the region-wide MSCI ex-Japan index's daily gain at 0.58%. Japan's Nikkei 225, meanwhile, ended the session with a 1.88% advance that pegged the benchmark at 22,750.24 points.