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The Wednesday Market Minute

  • U.S. equity futures move sharply higher on report that suggests China is still willing to pursue a partial trade deal despite Commerce Department moves to blacklist Chinsese tech firms.
  • U.S. moves to restrict visas for senior Chinese officials, however coupled with yesterday's tech blacklist and reports of investment limits into Chinese stocks, suggests little goodwill ahead of Thursday's summit in Washington.
  • China warns to "stay tuned" for reprisal moves, while cancelling further NBA events amid a row over Hong Kong-supporting Tweets from a senior league executive.
  • Oil prices drift lower after data showing a bigger-than-expected build in U.S. crude supplies, as well as Energy Department forecasts for record output n 2019 and 2020.
  • US equity futures suggest a 200 point gain on Wall Street ahead of August JOLTS jogs data at 10:00 am Eastern time.

Market Snapshot

U.S. equity futures surged higher Wednesday, pulling global stocks further into the green, following a Bloomberg report that suggested China is reading to pursue a partial trade deal with the United States despite recent moves by the Commerce Department to blacklist some of its tech companies.

The report added the caveat that Chinese officials are looking for assurance that no further tariffs are applied to U.S. imports ahead of tomorrow's crucial trade talks in Washington, but noted that Beijing is willing to step-up the pace of agricultural purchases even as it held to its earlier position on issues such as industrial reforms and state-owned company subsidies.

U.S. equity futures jumped sharply higher on the news, which cited senior officials in Beijing, and look to reverse some of last night's 313 point slump for the Dow Jones Industrial Average that hived its year-to-date gain to around 12%.

Contracts tied to the Dow indicated a 230 point bounce higher for the benchmark while those linked to the S&P 500 are guiding to a 28 point advance for the broadest measure of U.S. stocks. Nasdaq Composite futures indicate an 88 point opening bell gain.

Equity investors are also getting some support for another run towards record highs later in the year following comments yesterday from Federal Reserve Chairman Jerome Powell, who appeared to open the door to further rate cuts during a speech in Denver.

His remarks, which also included plans to increase bond purchases in order to steady conditions in overnight intra-bank lending markets, were buttressed by similarly dovish messages from Fed colleagues Charles Evan and Neel Kaskharki.

The Bloomberg report could ease some of the lingering investor concern linked to the darkening mood surrounding U.S.-China trade talks, with U.S. officials unveiling restrictions and sanctions on Chinese interests and Beijing warning to "stay tuned" for reprisals.

The U.S. State Department delivered the latest salvo late Tuesday when it announced visa restrictions on senior Chinese officials, a move it linked to the Commerce Department's decision to blacklist 8 China-based tech firms, as well as 20 separate entities, for their role in mistreating ethnic minority Muslims around the country.

The two policy moves were sandwiched by a Tuesday report that suggested White House officials were looking at ways in which to limit government pension fund investments in Chinese stocks, which only added to the broader feelings of ill-will that appear to characterize Thursday's high-level trade talks in Washington, which are scheduled to include China's Vice Premier Liu Hie, Treasury Secretary Steve Mnuchin and US Trade Representative Robert Lighthizer.

China's decision to ban the broadcast of NBA basketball games, while cancelling other events linked to the league's series of pre-season matches in the region, following a Tweet from a Houston Rockets' executive that expressed pre-Hong Kong sentiments also suggested the talks could struggle to find a way forward in the year-long dispute that has slowed global trade, shuttered factory output and depressed consumer prices.

European stocks opened modestly weaker in Frankfurt, but quickly built gains with the Stoxx 600 rising 0.88% following the Bloomberg headline and Britain's FTSE 100 gaining 0.27% in London even as the country's Brexit drama continues to suggest little progress heading into the country's October 31 EU exit deadline.

Away from equities, the CME Group's FedWatch tool continues to suggest an 86% of a rate cut at the next Fed meeting later this month, while odds of a follow-on reduction in December are largely seen as a 50/50 split.

Benchmark 10-year U.S. Treasury note yields were marked modestly higher, at 1.541%, at the start of European trading, while the U.S. dollar index was 0.14% lower at 98.95.

Global oil prices also reversed earlier declines, which followed a bigger-than-expected buildup in U.S. crude stocks from the American Petroleum Institute's weekly report, and projections from the Energy Department that forecast record U.S. output of more than 13.1 million barrels of oil next year, as the dollar retreated and investor sentiment improved.

Brent crude contracts for December delivery, the global benchmark, were seen 27 cents higher from Tuesday's New York close to trade at $58.51 per barrel while WTI contracts for November delivery, which are more tightly linked with U.S. gasoline prices, were marked 30 cents higher at $52.94 per barrel.