The Wednesday Market Minute
- Global stocks extend gains on hopes that a March 2 deadline for a deal in U.S.-China trade talks could be extended.
- President Trump tells reporters he could "let that slide" if talks are progressing as high-level negotiations resume Thursday in Beijing.
- The bullish market tenor contradicts a recent survey of global fund managers, whose allocations to stocks fell to the lowest level in three years this month.
- Global oil prices rise for a second session as OPEC details January output cuts and Saudi Arabia hits at a big drop in March production, offsetting record high drilling rates in the United States.
- U.S. equity futures suggest a triple digit gain for the Dow ahead of earnings from Activision Blizzard, Under Armour and Molson Coors.
Global stocks extended gains for a third session Wednesday, taking markets in Asia to fresh four-month highs, amid optimism that the-self imposed deadline on U.S.-China trade talks could be extended if the two sides are close to a deal.
President Donald Trump raised the prospect of an extension to the March 2 end date, which Chairman of the Council of Economic Advisers Kevin Hassset only days ago insisted was a "real deadline", while speaking to reporters Tuesday in Washington.
"If we're close to a deal where we think we can make a real deal and it's going to get done, I could see myself letting that slide for a little while," Trump said. "But generally speaking, I'm not inclined to do that ... we're doing very well over in China."
The modestly softer tone, which comes ahead of key talks between Treasury Secretary Steve Mnuchin, Trade Representative Robert Lighthizer and China Vice Premier Liu He Thursday and Friday in Beijing, suggests the two sides see some progress on key issues such as alleged intellectual property theft and force technology transfers that have been held as sticking points to a comprehensive agreement by officials in Washington.
Asia stocks extended last night's Wall Street rally on the news, rising 0.6% to a fresh four month high, while Japan's Nikkei 225 added 1.34% to close at a two-month peak of 21,144.48 points.
Early indications from U.S. equity futures suggest similar gains back home, with contracts tied to the Dow Jones Industrial Average indicating an 88 point advance and those linked to the S&P 500, which has gained 9.5% so far this year, are guiding to an 8.8 bump higher for the broader benchmark.
The recent equity market gains appear to contract broader bearish mood of global fund managers, according to Bank of America Merrill Lynch's February survey of 218 investors controlling around $625 billion in assets.
The poll found that they've trimmed their equity holdings to the lowest levels in two-and-a-half years favoring cash positions and defensive investments as more than half of those polled said they were bearish on both the growth and inflation outlook for the global economy next year.
European stocks were also stronger at the start of trading Wednesday, with the benchmark Stoxx 600 index rising 0.6%, alongside similar percentage gains for bourses around the region, even as the euro firmed to 1.1317 against a modestly weaker U.S. dollar, which eased in overnight trading as the bullish market tenor took over.
Global oil prices followed suit, rising for a second consecutive session after data yesterday showed a sharp decline of 800,000 barrels per day in OPEC production over the month of January, as well as signals from its biggest member, Saudi Arabia, that its March output would fall to 9.8 million barrels per day in March.
Brent crude contracts for April delivery, the global benchmark, were marked 60 cents higher from their Tuesday close in New York and changing hands at $62.92 per barrel while WTI contracts for March delivery -- which closed at the lowest level in two weeks yesterday -- were seen 40 cents higher at $53.50 per barrel.