The Monday Market Minute
- U.S. stocks look to extend gains this week, and possibly re-test all-time highs, as investors bet on both central bank support and a breakthrough in trade talks between Washington and Beijing.
- Global gains were tempered, however, by rising military tensions between the U.S. and Iran, as well as the threat of "significant" sanctions on Tehran following last week's downing of an unmanned U.S. military drone.
- European Stocks open flat, with a surprise profit warning from Daimler and a stronger euro holding down gains for regional benchmarks.
- Global oil prices edge higher as Secretary of State Mike Pompeo heads to the Gulf for talks with U.S. allies and prepares to announces Tehran sanctions.
- Wall Street futures suggest modest opening bell gains for the three major benchmarks, following three consecutive weekly gains, with this week's G20 Summit in Osaka firmly in focus.
U.S. stocks look set to test all time highs again Monday, following a third consecutive weekly gain for all three benchmarks on Wall Street, as investors continue to bet that central bank support will boost global equities and this weekend's G20 Summit in Osaka will trigger a breakthrough in U.S.-China trade talks.
China's state-run Xinhua news agency confirmed for the first time Sunday that President Xi Jinping will attend the two-day summit, which begins Friday in Japan, and is expected to meet with President Donald Trump for the first time since trade talks broke down in early May and the U.S. increased tariffs on China-made goods heading into the United States.
China's Vice Commerce Minister Wang Shouwen told reporters in Beijing Monday that it was important for both sides "to have to compromise and make concessions", adding he hopes the U.s. can "remove certain unilateral measures inappropriately taken against Chinese companies in the spirit of free trade and the World Trade Organisation."
Any potential breakthrough is likely to be incremental rather than comprehensive, given the hundreds of billions of dollars of trade each year between the world's two biggest economies, but the fact that the two leaders are meeting at all has investors discounting last week's military tensions between the U.S. and Iran, allowing Asia stocks to book solid overnight gains and setting up Wall Street for another run at record highs.
Contracts tied to the Dow Jones Industrial Average suggest a 30 point opening bell gain, following on from last week's 2.41% advance, while those linked to the S&P 500 suggest a 4 point bump for the broader benchmark, which rose 2.2% last week and is up more than 7.2% for the month of June.
Caesars Entertainment Corp. (CZR - Get Report) shares were a notable early market mover, rising 15% after Eldorado Resorts Inc. (ERI - Get Report) confirmed Monday that it will combine with its iconic rival in a $17.3 billion merger that will create the biggest U.S. gaming company.
Bristol-Myers Squibb (BMY - Get Report) shares were also on the move, falling 4.4% after the group said the U.S. Federal Trade Commission was still looking into its proposed $74 billion takeover of cancer specialist Celgene Corp. (CELG - Get Report) and that it would sell that company's psoriasis to push the deal through.
Still, the U.S. threat of "significant" sanctions on Iran, following last week's downing of a $130 million Northrup Grumann (NOC) made military drone and the 11th-hour cancellation of a Trump-ordered airstrike is likely to keep investors cautious in the coming days as they keep a close eye on oil prices and the ongoing weakness of the U.S. dollar.
"We are going to deny them the resources they need to (fund military activities in the Gulf region, thereby keeping American interests and American people safe all around the world," Secretary of State Mike Pompeo told reporters in Washington Sunday.
Brent crude contracts for August delivery, the global benchmark, were seen 2 cents higher from their Friday close in New York and changing hands at $65.22 per barrel in early European trading.
WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked 41 cents higher at $57.84 per barrel after notching their biggest five-day gain since December 2016 last week.
European stocks were weaker by mid-day in Frankfurt Monday, with the region-wide Stoxx 600 benchmark held down by a stronger euro, which traded at a three-month high of 1.1394 against the U.S dollar, and persistently weak data from German, the region's biggest economy, and its struggling auto industry.
Daimler AG (DMLRY) issued a surprise profit warning Monday, telling investors it expects second quarter earnings to only meet last year's levels, after earlier forecasting a modest advance. The assessment sent shares in the luxury carmaker down 4.6% in early Frankfurt trading, pulling rivals BMW AG (BMWYY) and Volkswagen (VLKAY) along with it and dragging the DAX performance index benchmark deeper into the red.
Overnight in Asia, hopes of a U.S-China detente on trade helped the region-wide MSCI Asia ex-Japan benchmark gain 0.33% on the first day of the trading week, although a stronger yen held down gains for the Nikkei 225, which rose 0.13% in Tokyo to end the session at 2,285.99 points.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, slipped to a three-month low of 96.02 in overnight trading as investors priced in deeper interest rate cuts from the Federal Reserve, helping gold prices hold past $1,400 an ounce, just a few dollars short of its six-year high.