The Thursday Market Minute
- Global stocks extend gains after the U.S. and China confirm high-level trade talks in October.
- China's Commerce Ministry says it will strive to achieve "real progress" in first talks since late June.
- Asia stocks rally to one-month high, Europe books solid gains as government bond yields ease and investors creep back into risk markets.
- Global oil prices ease from last night's 4% rally as U.S. crude stocks build and the dollar holds its ground against major currency peers.
- Wall Street futures suggest broad opening bell gains ahead of weekly jobs data at 8:30 am eastern time.
Global stocks traded higher again Thursday, lifting Wall Street futures towards a second consecutive triple-digit gain for the Dow, as investors reacted to news that China and the U.S. will resume trade talks in October.
Wall Street gains were further boosted by data from ADP showing that hiring in the private sector added 195,000 new jobs to the economy last month, well ahead of the 149,000 consensus forecast and the biggest gain since April.
China's Commerce Ministry said the two sides will hold high-level negotiations in Washington early next month, with the U.S. Trade Representative confirming a sit-down "in the coming weeks". Preliminary talks are expected to be held later this month, the Commerce Ministry said following a Wednesday phone call with China's Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin.
News of the talks -- the first high-level negotiations since the weeks prior to June's G20 Summit in Osaka -- lifted stocks in Asia and boosted European markets in early Thursday trading. Last night's Parliamentary defeat for U.K. Prime Minister Boris Johnson, which effectively removes the near-term risk of a "No Deal" Brexit, as well as Hong Kong's decision to withdraw its controversial China extradition bill from Parliament, added to the moderately bullish tone.
"The lift in risk sentiment appears mitigated by the concern that the latest positive developments surrounding the US-China trade impasse may prove fleeting and do not yet fully nullify the downside risks to the global economy," said FXTM market analyst Han Tan. "In order for risk sentiment to push significantly higher, markets will need to be shown material signs that US and China are indeed drawing closer to a meaningful and lasting trade deal."
"Existing tariffs need to be dismantled in order to alleviate pressures on the global economy," he added. "Until then, potential gains for risk assets are expected to remain capped while safe haven assets are likely to hang on to most of its recent gains."
U.S. equity futures suggest solid gains on Wall Street Thursday, with contracts tied to the Dow Jones Industrial Average indicating a 280 point gain while those linked to the S&P 500 are guiding to a 28.5 point advance for the broader benchmark. Nasdaq Composite futures suggest a 95 point gain for the tech-focused index.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, slipped 0.25% lower to 98.22 in early European trading, as the pound extended gains following last night's Parliamentary debate and changed hands at 1.2333.
Benchmark 10-year U.S. Treasury note yields edged higher, rising 4 basis points to 1.531% as investors directed cash into riskier markets, taking the yield difference between 2-year notes to around 4.5 basis points, the widest since August 21.
European stocks got off to a solid start in Frankfurt, although gains were capped by a modestly stronger euro, which traded at 1.1040, and weaker-than-expected industrial orders from German, where data continues to suggest the possibility of recession in the region's biggest economy.
The Stoxx 600 benchmark gained 0.67% by early afternoon trading in Frankfurt, while Britain's FTSE 100 fell 0.74% as the pound climbed to a one-week high against the dollar in London.
Overnight in Asia, the region-wide MSCI ex-Japan benchmark rose 0.6% to hit the highest levels in more than a month, while a weaker yen helped Japan's Nikkei 225 rise 2.12% in Tokyo.
Global oil prices eased somewhat from last night's 4% surge, which came before data from the American Petroleum Institute which indicated a bigger-than-expected build in domestic crude stocks of 400,000 barrels in the week ending August 30. Crude reversed course, however, as the dollar eased in foreign exchange markets.
Brent crude contracts for November delivery, the global benchmark, were seen 23 cents higher from their Wednesday close in New York and changing hands at $60.93 per barrel while WTI contracts for October, which are more tightly linked to U.S. gas prices, were marked 7 cents higher at $56.33 per barrel.