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The Monday Market Minute

  • Global stocks slip lower as U.S.-China trade talks yield tariff relief, but lack of detail keeps investors cautions heading into the third quarter earnings season.
  • President Donald Trump hails China pledge to buy as much as $50 billion a year in agricultural products, but with no text from Friday's meetings, and big issues still unresolved, investor focus turns to November APEC summit in Chile for next steps.
  • China's September exports slump as growth stalls and U.S. tariffs kick-in, but trade surplus remains healthy despite myriad White House efforts at reduction.
  • U.S. Q3 earnings kick-off Tuesday with key bank updates that could set the season's tone, but forecasts suggest the first year-on-year profit declines since Q3 2016. 
  • US equity futures suggest opening bell declines on Wall Street while bond markets remain closed for the Columbus Day holiday.

Market Snapshot

Global stocks traded mostly lower Monday, while U.S. equity futures suggested modest declines to start the week on Wall Street, as investors parsed through the thin details of last week's trade truce between Washington and Beijing and prepped for the start of the third quarter earnings season that could define market direction between now and the end of the year.

Futures weakened, however, amid reports from China that suggested officials want more talks with their U.S. counterparts before signing the so-called 'Phase 1' agreement hailed by President Donald Trump on Friday.

Trump said the agreement his trade team reached with Chinese officials in Washington as "by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country" and said a formal signing ceremony will likely happen in the next four to five weeks. 

Trump highlighted what he said was a pledge by China to buy as much as $50 billion in U.S. agricultural products, starting "immediately", while noting progress on issues such as alleged currency manipulation and intellectual property theft.

Treasury Secretary Steven Mnuchin, however, described Friday's accord as more of a "fundamental understanding on the key issues", telling reporters in Washington that "we will not sign an agreement unless we get and can tell the President that this is on paper." China's state-backed news outlet Xinhua would only say the two sides "agreed to make the efforts towards a final agreement".

With no text in place from Friday's meeting, and few details on offer besides the President's reference to agricultural purchases, investors are likely to focus on the November 16 meeting between President Trump and President Xi Jinping at the Asia Pacific Economic Cooperation summit in Chile for a formal declaration of the agreement's content.

U.S. equity futures suggest modest declines on Wall Street as a result of the many lingering questions, with contracts tied to the Dow Jones Industrial average, which roared 319 points on Friday, indicating a 46 point opening bell slide. Contracts linked to the S&P 500, which is still down 0.22% for the month, are guiding to a 4.5 point bump to the downside for the broader benchmark.

The most concrete takeaway from the Friday agreement, however, is the removal of planned tariff increases on October 15, which would have boosted levies on $250 billion worth of China-made goods by 5 percentage points to 30%. Mnuchin said Trump as yet to decide the fate of similar increases set for December 15. 

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However, with the October barrier gone, and talks at least moving in the right direction, investors are now ready to focus on the third quarter earnings season, which kick-off in earnest Tuesday with updates from banking giants JPMorgan (JPM) - Get JPMorgan Chase & Co. Report , Citigroup (C) - Get Citigroup Inc. Report , Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. Report , Wells Fargo (WFC) - Get Wells Fargo & Company Report as well as healthcare Dow components Johnson & Johnson (JNJ) - Get Johnson & Johnson Report and UnitedHealth Corp. (UNH) - Get UnitedHealth Group Incorporated Report

Refinitiv data suggests collective S&P 500 earnings will likely fall 3.2% from the same period last year, while bank earnings will slip 1.2%, notching the first year-on-year profit decline since the third quarter of 2016.

The Federal Reserve's late Friday move to resume bond purchases, however, as well as market expectations of an end-October rate cut are likely to continue supporting equities in the near-term, and the U.S. dollar remains firmly in place at near two-and-a-half month highs against a basket of its global peers.

European stocks, however, slipped lower Monday in Frankfurt, with the Stoxx 600 sliding 0.84% as basic resource and bank stocks lead the decliners and the euro traded at 1.1027 against the U.S. dollar.

Britain's FTSE 100 was 0.53% lower by mid-day in London and getting no support from a weaker pound, which fell from Friday's high of $1.2708 to around $1.2535 as deeper questions were asked of the reported breakthrough in U.K.-EU Brexit talks. 

Overnight in Asia, stocks booked solid gains across the region, although Japan's Nikkei 225 remained closed for the nation's annual Health and Sports Day holiday, with the MSCI ex-Japan benchmark rising 0.98% thanks in part to a 1.24% pop for the Shanghai Composite.

Gains were capped, however, by a disappointing set of September China trade figures, which showed overall exports falling  3.2% from last year, while shipments to the U.S. slumped 10.7%, as global growth slowed and White House tariffs kicked-in.

Global oil prices were back on the back foot, however, despite a solid 10.8% rise in September China imports as a stronger U.S. dollar and lingering questions over the detail of Friday's U.S.-China trade detente snuffed out most of Friday's brief rally.

Brent crude contracts for December delivery, the global benchmark, were seen $1.24 lower from Friday's New York close to trade at $59.27 per barrel while WTI contracts for November delivery, which are more tightly linked with U.S. gasoline prices, were marked $1.15 lower at $53.55 per barrel.