The Friday Market Minute

  • Global stocks mixed as investors weigh progress in U.S.-China trade talks over slowing growth signals in the world's second largest economy.
  • Asia stocks hold four month highs despite the weakest reading for China business and manufacturing activity in three years as the U.S. hails "substantial" progress in talks with Beijing.
  • European stocks hit a two-month high, but give back gains after another weak reading for activity in the manufacturing sector and a further fall in Deutsche Bank shares following weaker-than-expected fourth quarter earnings.
  • U.S. equity futures suggest modest gains for Wall Street ahead of the January jobs report and earnings from Chevron, Exxon and Merck.

Market Snapshot

Global stocks posted mixed gains Friday, with U.S. futures set for a modestly higher open but European shares giving back earlier gains, as investors weighed progress trade talks between Washington and Beijing and a dovish Federal Reserve over further signals of weakening growth in China.

A key reading of business and manufacturing activity in China suggested the world's second largest economy fell below the 50 mark that separates growth from contraction for a second consecutive month, according to Caixin PMI data, the weakest set of readings in at least three years. New orders for the country's export sector also shrank, but external demand did suggest a rebound thanks to recent progress in U.S.-China trade talks.

That progress was characterized by the White House as "substantial" late Thursday following a two-day meeting between Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer, which culminated in brief talks with President Donald Trump and a pledge to sit down with his opposite number, Xi Jinping, to potentially reach a deal prior their self-imposed March 2 deadline.

"I hope our two sides will continue to act in the spirit in mutual respect," Xi said in a letter read by an interpreter to President Trump. "An agreement would send a positive signal to our two peoples and the broader international community."

Looking for China to open their Markets not only to Financial Services, which they are now doing, but also to our Manufacturing, Farmers and other U.S. businesses and industries. Without this a deal would be unacceptable!

— Donald J. Trump (@realDonaldTrump) January 31, 2019

Asia markets reacted with more weight to the trade talk breakthrough than the troubling domestic China data, with the MSCI ex-Japan benchmark creeping into positive territory for the session and extending gains to a four-month high while the Nikkei 225 eked out a small 0.07% gain to close at 20,788.39 points.

European stocks were moderately higher at the start of trading in Frankfurt, but reversed earlier gains following a dip in Deutsche Bank (DB) shares on weaker-than-expected fourth quarter earnings and a private reading of manufacturing growth in the region fell for the sixth consecutive month.

"The January PMI adds to the likelihood that the manufacturing sector is in recession and will act as a drag on the economy in the first quarter," said IHS economist Chris Williamson. "Worryingly, weaker than anticipated sales mean warehouses are filling up with unsold stock ... suggesting firms will need to cut operating capacity in coming months unless demand revives, boding ill for future production growth."

Britain's FTSE 100 bumped 0.27% higher and edged towards the 7,000 point level for the first time since December 4 thanks to solid moves for energy and basic resource sector stocks

Early indications from U.S. equity futures suggest further gains on Wall Street today, although market direction will largely be dictated by the pace of job creation over the month of January, which will be revealed by the Bureau of Labor Statistics' employment report at 8:30 am Eastern Time.

Contracts tied to the Dow Jones Industrial Average indicate a 17 point gain for the 30-stock board while those linked to the broader S&P 500  suggest a 1 point gain for the broader benchmark. Nasdaq Composite futures, however, are guiding to a 17.8 point decline following disappointing fourth quarter earnings from Amazon Inc. (AMZN) late Thursday.

Amazon shares were indicated sharply lower in pre-market trading Friday after the world's biggest online retailer posted record Christmas sales but forecast first quarter revenues that missed analysts' forecasts.

Amazon shares were marked 4.3% lower in pre-market trading Friday, indicating an opening bell price of $1,645.00 each, a move that would trim the stock's three-month gain to around 2.8% and value the Seattle, Washington-based group at around $800 billion.

Exxon Mobil (XOM) shares, however, jumped 2.2% higher after the oil major posted much stronger-than-expected fourth quarter earnings of $1.41 per share on revenues of just under $72 billion.

Global oil prices were marked modestly higher in early European trading, with investors using the trade talk progress, and a weaker U.S. dollar, to drive prices on a new front-month Brent contract higher despite concerns over end demand linked to the China slowdown.

Brent crude contracts for April delivery, the global benchmark, were marked 10 cents higher from their Thursday close in New York and changing hands at $60.94 per barrel while WTI contracts for March were seen 7 cents lower at $53.72 per barrel.