The Thursday Market Minute
- Wall Street set for fresh record highs as global stocks rally on comments from China pointing to a roll-back on tariffs as part of a phase one trade agreement with the United States.
- Commerce Ministry says tariffs reductions will define near-term trade pact, but offers no timing on the agreed roll-back.
- European markets rally, pulling the Stoxx 600 benchmark to a fresh four-year high, while government bond yields continue to rise amid improving trade and economic sentiment.
- Global oil prices gain amid the broader market rally, although gains are capped by EIA data showing a bigger-than-expected build in domestic crude stocks last week.
- Wall Street futures suggest fresh records highs ahead of after-the-bell earnings from Disney, Activision Blizzard and Take-Two Interactive.
Wall Street futures surged higher Thursday, setting up another record run for all three major benchmarks, following comments from senior officials in Beijing that suggest the US and China could roll back tariffs on billions worth of goods as part of the soon-to-be-agreed phase one trade pact between the world's two biggest economies.
Commerce Ministry spokesman Gao Feng told reporters Thursday that the tariffs, which apply to around $560 billion worth of goods from both sides, will be reduced in phases as the two sides inch their trade agreement forward in the coming weeks. The remarks followed a series of reports this week that suggest a December signing ceremony -- possibly in London -- will mark the first major step towards ending the 16-month trade dispute that has threatened to tip some of the world's biggest economies closer to recession.
"In the past two weeks, the lead negotiators from both sides have had serious and constructive discussions on resolving various core concerns appropriately," Gao told reporters in Beijing. "Both sides have agreed to cancel additional tariffs in different phases, as both sides make progress in their negotiations."
U.S. equity futures jumped higher on the comments, while global stocks extended multi-month and multi-year highs, as investors triggered 'risk on' positions in the hopes of a clear agreement that will slowly eliminate trade barriers between Washington and Beijing.
Contracts tied to the Dow Jones Industrial Average are indicating a 132 point opening bell gain, a move that would lift the benchmark to a fresh record high, while those linked to the S&P 500, which has gained 22.7% so far this year, are suggesting a 13.7 point advance for the broader benchmark. Nasdaq Composit futures are priced for a 51 point gain.
European stocks were also on the rise, with the trade-sensitive DAX performance index in German gaining 0.7% by mid-day in Frankfurt, a move that helped pull the Stoxx 600 benchmark to a fresh four-year high of 406.03 points.
Britain's FTSE 100 was also firmer, rising 0.15% ahead of a Bank of England rate decision at 7:00 am Eastern time, one of the last policy meetings under the seven year term of Governor Mark Carney, that is expected to deliver no change to key lending rates as the nation's Parliamentary elections swing into full gear.
Overnight in Asia, Japan's Nikkei 225 extended gains from last night's 13-month high, rising 0.11% to close at 23,330.32 points while the region-wide MSCI ex-Japan benchmark hit a four-month high as it rode a 0.5% gain into the close of trading.
Global oil prices were also on the march, rising firmly across the board amid renewed optimism for demand from China, the world's biggest energy importer, although gains were capped by data from the U.S. Energy Department yesterday that indicated a bigger-than-expected 7.1 million increase in domestic crude stocks last week.
Brent crude contracts for January delivery, the global benchmark, were seen 79 cents higher from their Tuesday close and trading at $62.53 per barrel, while WTI contracts for December were marked 79 cents higher at $57.14 per barrel.