The Thursday Market Minute

  • Wall Street futures slide amid reports that suggest China will demand a host of concessions from President Donald Trump in order to resume trade talks between the world's two biggest economies.
  • Boeing shares slump after FAA finds new 737 MAX risk, taking more than 150 points from Dow's opening bell gain.
  • The South China Morning Post, however, reports that US and China officials are preparing press releases that would indicate a delay in new tariffs and a commitment to extended dialogue.
  • President Donald Trump arrived in Osaka this morning and is set to meet Xi Jinping on the sidelines of the G20 Summit at 10:30 pm Eastern time on Friday.
  • Global oil prices ease following the biggest weekly decline in U.s. crude stocks in nearly three years as investors take profits from a June rally that's lifted prices by 15%.
  • Wall Street futures suggest modest opening bell declines for the Dow, but a small bump higher for the S&P 500, ahead of quarterly earnings from Nike and Walgreens and weekly jobless claims data at 8:30 am Eastern time.

Market Snapshot

Wall Street futures reversed gains Thursday, following on from a solid overnight session in Europe and Asia, amid reports that China will seek a host of demands from President Donald Trump in order to renewed stalled trade talks between the world's two biggest economies. 

The Wall Street Journal reported that China's President, Xi Jinping, will present terms for settling the years-long trade dispute, but noted that he will demand an end to the U.S. blacklisting of Huawei Technologies, drop efforts to get China to buy more American exports and lift punitive tariffs on U.S.-bound exports.

The report countered earlier market gains that stemmed from a report that suggest a potential truce in U.S.-China talks that could lead to the avoidance of new tariffs and a commitment to further, more detail discussions following this weekend's G20 Summit in Japan.

The South China Morning Post reported Thursday that officials working for both Washington and Beijing were preparing separate press releases for the conclusion of a sideline meeting between Presidents Donald Trump and Xi Jingping, which is expected to take place at 10:30 pm Eastern time on Friday. The two sides would agree to delay addition tariffs, the paper reported, a pre-condition for Xi's attendance at the Osaka Summit.

U.S. equity futures now suggest modest declines Wall Street, with contacts tied to the Dow Jones Industrial Average indicating an 80 point pullback, after futures rose nearly 100 points in the early, while those linked to the S&P 500 guiding to an 1.5 point bump that could snap a four-day losing streak for the broader benchmark.

Boeing Co. (BA - Get Report) shares were a big portion of the Dow's slump, and were indicated sharply lower in pre-market trading after the U.S. Federal Aviation Administration said it found yet another issue with the planemaker's 737 MAX software that could further delays to its return to service.

Trump told Fox Business Network Wednesday that China "wants to make a deal more than I do", adding that it was "absolutely possible that we'll make a deal, but I'm also very happy where we are now." Trump also suggested that a fresh round of tariffs on China-made goods, if applied, would only bet set at 10%, rather than 25%, a concession that could pave the way for a broader agreement on future talks.

Reports of the potential trade truce, as well as a renewed pledge from Bank of Japan Deputy Governor Masazumi Wakatabe to preemptively ease policy if the economy were to face a "severe downturn", gave Asia stocks a solid overnight boost, with the MSCI ex-Japan benchmark rising 0.8% and the Nikkei 225 jumping 1.19% as the yen eased to 108.11 against a stronger U.S. dollar.

Investor optimism for a potential breakthrough in the talks, which collapsed in early May amid accusations of China "backtracking" on previous commitments, was also supported by the late addition to the U.S. delegation of Commerce Secretary Wilbur Ross, who was asked to travel to Osaka by the President, as well as a larger-than-expected delegation of officials from Beijing,

The mood helped extend gains for the U.S. dollar index, which tracks the greenback against a basket of six global currencies, and nudge global government bond yields marginally higher in the overnight session, where 10-year Treasuries traded at 2.062% and 10-year German bunds rose to -0.27%.

Global oil prices, however, continued to decline as the dollar rebounded from this week's three-month lows, with investors taking profits ahead of tomorrow's G20 Summit and in the wake of Energy Information Administration data yesterday that indicated the biggest weekly reduction in domestic crude stocks -- 12.8 million barrels -- in nearly three years.

Brent crude contracts for August delivery, the global benchmark, were seen 40 cents lower from their Wednesday close in New York and changing hands at $66.09 per barrel in early European trading. WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked 24 cents lower at $59.14 per barrel.

Eurozone economic sentiment indicator.

Sharp fall in the Eurozone Economic Sentiment Indicator, more than reversed the previous month's increase, well below the consensus estimate of 104.6 and at a 34-month low pic.twitter.com/1Gh3VAqWiu

- Daniel Lacalle (@dlacalle_IA) June 27, 2019

European stocks were also firmer at the start of trading in Frankfurt, but investors quickly reversed those gains following the Journal report and a weaker-than-expected reading in Eurozone economic confidence, as the Stoxx 600 benchmark edged 0.05% lower by mid-day and Britain's FTSE 100 notched a 0.26% decline as the pound rose to 1.2707 against the U.S. dollar.

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