The Monday Market Minute
- Global stocks extend gains as investors shift focus to bets on near-term stimulus from the world's biggest central banks.
- China lowers the reserve ratio for major lenders, releasing $130 billion into the broader economy, as August exports slump amid a global trade and manufacturing slowdown.
- Euro slips ahead of Thursday's ECB rate decision that is expected to unveil a major stimulus package, including the re-start of quantitative easing, in order to stoke currency area inflation.
- Global oil prices bounce higher after Saudi Arabia replaces its Energy Minister, signalling a possible change in policy ahead of its planned $2 trillion IPO of Saudi Aramco.
- Wall Street futures suggest modest opening bell gains for the three major indices as stocks continue to defy projections of a sharp September pullback.
Global stocks extended gains Monday, pulling U.S. equity futures into the green, as investors shifted focus from last week's jobs report to bets on near-term stimulus from the world's biggest central banks to offset the impact of slowing trade and manufacturing activity.
China's central bank cut the ratio of cash banks must hold on their balance sheets for the seventh time in less than two years late Friday in a move that released around $130 billion in fresh liquidity into the world's second largest economy. The move came just one day ahead of August trade data that showed a slump in overall exports, particularly to the United States, as the impact of tariffs and a broader global slowdown sputtered the country's export engine.
With the European Central Bank expected to reveal a major stimulus effort later this week, including the resumption of bond purchases from its dormant quantitative easing program, and Federal Reserve Chairman Jerome Powell vowing to "act as appropriate" on interest rates in order to "sustain the expansion" of the world's biggest economy, investors are hoping the moves will continue to support global equities, which have defied predictions of an extended slump with solid gains over the first week of September.
U.S. equity futures suggest modest gains to start the week on Wall Street Monday, with contracts tied to the Dow Jones Industrial Average, which has gained 1.5% so far this month, indicating a 70 point bump at the start of trading. The S&P 500, which is up 1.8% for the month and less than 50 points from its all-time high, is slated to rise around 10 points at the opening bell, while the tech-focused Nasdaq Composite index is indicated 23.5 points higher.
AT&T (T) shares were a notable early-market mover, surging nearly 10% after activist investors Elliott Management wrote a letter to the company's board of directors urging a broader business review that it says would unlock investor value after taking a $3.2 billion stake in the telecoms and media company.
European stocks got off to a solid start Monday, with the Stoxx 600 benchmark rising 0.15% in Frankfurt as the euro drifted lower ahead of Thursday's ECB rate meeting, but pared those gains as the session wore on.
Britain's FTSE 100 popped 0.5% in London as basic resource stocks led the benchmark following Friday's move by China to boost liquidity in the broader economy, but faded as the pound rose to 1.2317 against the U.S. dollar following stronger-than-expected July GDP data.
Overnight in Asia, China's Reserve Requirement Ratio cut, as well as a downgrade of the reading for second quarter GDP growth in Japan, both added to bets of further central bank stimulus and bolstered regional stock markets, with the Nikkei 225 rising 0.56% in Tokyo and the Shanghai Composite gaining 0.84% on the mainland.
Away from equities, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was little changed at 98.445 as the euro slipped to 1.1026 and the yuan eased to 7.1220 after Friday's rate cut.
In bond markets, benchmark 10-year U.S. Treasury note yields extended their mini rally to 1.562% in overnight trade as traders attempted to get ahead of any bond-buying wave sparked by Thursday's ECB rate decision, but pared that advance heading into the opening bell to trade near a two-week high of 1.60%.
Global oil prices were also active, with crude posting modest gains in the wake of Saturday's decision by King Salman of Saudi Arabia to replace the country's powerful Energy Minister -- and one of OPEC's most respected officials -- with a member of the royal family in a move that could signal major changes in the Kingdom's energy policy.
Brent crude contracts for November delivery, the global benchmark, were seen 25 cents higher from their Friday close in New York and changing hands at $61.79 per barrel while WTI contracts for October were marked 30 cents higher at $56.82 per barrel.