The Wednesday Market Minute

  • Global stocks extend gains following bullish trade comments from President Donald Trump that suggest a near-term agreement with China before the end of the year.
  • China's industrial profits fall the most in eight months in October, underscoring the trade-related weakness in the world's second-largest economy.
  • European stocks build on four year highs as trade optimism, alongside dovish central bank signals in both Europe and the US, support further equity market gains. 
  • Global oil prices stall as trade bulls are offset by data from the API showing a bigger-than-expected 3.6 million increase in domestic crude inventories.
  • Wall Street futures suggest fresh record highs for the three major benchmarks ahead of weekly jobless claims data and earnings from Deere & Co.

Market Snapshot

Wall Street futures look set to push further into record high territory Wednesday, pulling global stocks into the green along the way, as investors prep for the final full trading day of the Thanksgiving holiday week riding a bullish trade underpinned by supportive central banks around the world.

President Donald Trump added to the optimistic tone yesterday when he told reporters outside the White House that the U.S. was in the "final throes of a very important deal" with China, while officials in his administration briefed the media on the possibility of a phase one agreement before the end of the year.

"It's going very well but at the same time we want to see it go well in Hong Kong," Trump told reporters in Washington after lawmakers passed a bill supporting human rights in the China-backed territory. "I think that President Xi can make that happen. I know him and I know he'd like to make it happen." 

China's impetus for a near-term agreement was made even more apparent Wednesday with data showing the world's second-largest economy continues to struggle with slowing domestic demand and tariff-lead pressures on exports. China's industrial profits fell for the third consecutive month in October, the government said, with the steepest drop in eight months adding to broader pressures on input prices and bank liquidity.

Closer to home, Federal Reserve Governor Lael Brainard told the New York Association of Business Economics Tuesday that the central bank could target bond market interventions aimed at capping Treasury yields, as opposed to bulk monthly purchases, if the Fed Funds rate were to hit the zero lower bound during a sustained downturn. 

Wall Street futures look more focused on the prospects for a 2019 trade agreement, however, particularly given the looming December 15 deadline for tariffs on $170 billion worth of China made consumer goods which, alongside falling consumer confidence and mixed projections for holiday spending, could upend markets in the final weeks of the year if they are implemented.

Contracts tied to the Dow Jones Industrial Average, which closed at a record high 28,121.68 points last night, are priced for a 40 point opening bell gain while those linked to the S&P 500, which has gained 25.32% so far this year, are indicating a 7.6 point advance for the broader benchmark. 

Deere & Co. (DE) - Get Report  shares were an early mover of note, falling 3.8% after it posted modestly stronger-than-expected fourth quarter earnings Wednesday but cautioned that construction and agricultural equipment sales in the coming financial year are likely to decline sharply as trade uncertainty hammers demand.

European stocks were also stronger by mid-day ttrading in Frankfurt, with the Stoxx 600 rising to 0.3% to a fresh four-and-a-half year high as the trade-sensitive DAX index gained 0.3%.

Britain's FTSE 100, meanwhile, was marked 0.47% to the upside as the pound slipped to 1.2865 following polling data that indicated a narrowing lead for the business-friendly -- and pro-Brexit -- Conservative party over their left-leading Labor rivals.

Overnight in Asia, Japan's Nikkei 225 built on its 13-month high with a 0.28% gain that closed the benchmark at 23,437.77 points, while weaker stocks in China following the industrial profits data held back gains for the region-wide MSCI Asia ex-japan index, which was marked 0.35% higher heading into the final hours of trading.

Global oil prices were little changed in early European trading, however, as yesterday's data from the American Petroleum Institute, which showed a larger-than-expected 3.6 million weekly increase in domestic crude stocks, offset the broader trade optimism that lifted other commodity markets. If matched by figures from the Energy Department later this morning, the data would mark the fifth consecutive weekly rise in U.S. oil inventories.

Brent crude contracts for January delivery, the global benchmark, were seen 3 cents lower from their Tuesday close and trading at $64.26 per barrel, while WTI contracts for the same month were marked 3 cents lower at $58.38 per barrel.