The Friday Market Minute
- Global stocks extend gains, while Wall Street tests record highs, as investors react to easing U.S.-China trade tensions and price in the impact of the ECB's latest stimulus plan.
- President Trump says he could sign an interim trade deal with China, but prefers a broader pact following talks with the two sides next month in Washington.
- China's renewed signals on agricultural purchases, as well as announced delays in tariffs from both sides, suggest tensions are starting to ease.
- ECB bond buying plans, as well as low rate pledges, could spur broader equity market gains following Mario Draghi's last likely policy decision in Frankfurt.
- Wall Street futures suggest the Dow could extend its seven-day winning streak, and edge closer to all-time highs, with modest opening bell gain ahead of August retail sales data at 8:30 eastern time.
Global stocks extended gains for a fourth consecutive session Friday, pulling Wall Street futures to within touching distance of their all-time highs, as investors cheer consistent signs of a breakthrough in U.S.-China trade talks and factored in the impact of the European Central Bank's latest stimulus effort.
President Donald Trump told reporters in Washington Thursday that he would "consider" a partial trade deal with China that would build goodwill towards establishing a more comprehensive agreement, but said neither would be easy to negotiate.
Still, the President's decision to delay tariffs on $250 billion worth of China-made goods for two weeks, China's move to exempt some U.S. goods from further levies and reports of ramped-up purchases of agricultural products by Beijing have combined to suggest next month's talks in Washington could deliver a workable agreement between the world's two biggest economies.
Bullish sentiment from easing trade tensions was buttressed by the market impact from yesterday's stimulus package from the ECB, which cut the rate on its overnight deposit facility to -0.5% and pledged to resume its quantitative easing program with €20 billion in monthly purchases for an unlimited amount of time.
The moves drew an immediate reaction from Trump, who used the immediate decline in the euro to heap pressure on Federal Reserve Chairman Jerome Powell, who is expected to deliver a 25 basis point cut in the central bank's key lending rate next week, even as the economy hums along at a near-2% growth rate and core inflation sits at a decade-high of 2.4%.
U.S. equity futures suggest the combination of central bank support and reduced trade risk could help lift Wall Street back to the all-time highs it reached in mid-July, with contracts tied to the Dow Jones Industrial Average poised to rise for the eighth consecutive session with a 130 point advance at the opening bell, a move that would take the average to within 100 points of its all-time intra-day high.
Contracts tied to the S&P 500, which closed within 30 points of its all-time peak last night, suggest an 12.5 point gain for the broader benchmark while those linked to the tech-focused Nasdaq Composite are indicating a 31 point advance.
European stocks were also firmer on the session, with the Stoxx 600 rising 0.15% in Frankfurt as bank stocks reacted well to the ECB's decision to "tier" its deposit rate cut for the region's lenders. Britain's FTSE 100 was marked 0.1% lower, however, as the pound climbed 1% to a seven-week high of 1.2451 against a softer U.S. dollar.
Overnight in Asia, profit-taking from yesterday's ECB decision pushed the euro sharply higher against the U.S. dollar, as the single currency traded at 1.1088, putting downward pressure on the yen and helping Japan's Nikkei 225 notch a 1.05% gain by the close of trading in Tokyo.
The region-wide MSCI ex-Japan benchmark, meanwhile, was marked 0.52% higher at a fresh six-week high as the U.S. dollar eased and investors' risk appetite continued to dominate regional trade.
Global oil prices, however, were drifting lower in early European dealing, after a tumultuous week which saw the first change at the top of Saudi Arabia's oil ministry in three years, the firing of Iran hawk John Bolton as National Security Adviser to the President and data from both the API and EIA showing near 7 million barrel drawdowns in domestic crude stocks.
The end result for markets, which also had to navigate comments on OPEC output cuts and the IEA's monthly oil report, is likely a week declines for global crude, with Brent crude contracts for November delivery, the global benchmark, seen 24 cents lower from their Thursday close in New York and changing hands at $60.14 per barrel in early European trading while WTI contracts for October were marked 27 cents lower at $54.82 per barrel.