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The Monday Market Minute

  • Global stocks trade mixed as investors ride Friday's 750-point Dow rally that was built on dovish central bank signals and much stronger-than-expected December job creation data.
  • Japan's Nikkei 225 jumps 2.4%, while Asia stocks rise 1.3% as China vows to add new liquidity into the nation's financial system and U.S. China trade talks kick-off in Beijing.
  • European stocks book modest declines, blunted by political uncertainty linked to both Brexit and broader EU reform challenges, as Britain's key parliamentary vote looms.
  • Global oil prices rise to fresh 3-week highs as the U.S. dollar weakens and investors price-in renewed China demand alongside OPEC production cuts
  • U.S. stocks set to open modestly higher Monday with S&P 500 looking to extend its 7% gain since the Christmas Eve low ahead of ISM service sector data for December at 10:00 am eastern time.

Market Snapshot

U.S. equity futures edged higher Monday, following a pullback in European stocks, as investors pared gains for a global market rally fueled by much stronger-than-expected U.S. jobs data and  dovish messages from the Federal Reserve and the People's Bank of China that look to support beaten-down asset prices heading into the fourth quarter earnings season.

Markets had been buoyed by soothing comments on U.S.-China trade talks by President Donald Trump, who told reports Sunday that the world's second largest economy is "not doing well ... I think that gives them a great incentive to negotiate." U.S. official had their first face-to-face meeting of the year today in Beijing as part of a two-day round of talks aimed at advancing the framework set out by Trump and China's President Xi Jingping last month in Argentina.

"From the beginning we have believed that China-U.S. trade friction is not a positive situation for either country or the world economy," said Chin'a's Foreign Ministry Spokesman Lu Kang. "China has the good faith, on the basis of mutual respect and equality, to resolve the bilateral trade frictions."

China's pledge last week to add more than $220 billion in fresh liquidity into to nation's financial system, via two separate reductions in a key lending ratio for Chinese banks, came just hours before Federal Reserve Chairman Jerome Powell vowed to be "patient" with domestic rate hikes and noted his FOMC colleagues were "prepared to shift the stance of policy" if inflation were to ease alongside signals that suggest a slowing U.S. economy.

The collective moves drove Wall Street to its strongest across-the-board gain in several years, with the S&P 500 extending the gain from its Christmas Eve low to around 7% as the dovish central bank messages sandwiched data that showed a massive 312,000 new jobs were added to the U.S. economy last month, taking wage growth to the fastest pace in a decade.

However, early indications from U.S. equity futures suggest that rally may not extend into the Monday session, with contracts tied to the Dow Jones Industrial Average indicating a 22 point gain for the 30-stock average while those linked to the S&P 500 are guiding to a 2 point bump for the broader benchmark.

General Electric Co. (GE) shares were marked sharply higher in pre-market trading following a report that suggested Apollo Global Management could be preparing a $40 billion bid for the group's airplane leasing division.

GE shares were indicated to open 4% higher at $8.56 each, a move that would extend the stock's one-month gain to around 25% and value the troubled Boston, Mass.-based conglomerate at just under $74 billion.

Eli Lilly & Co. (LLY) said Monday it will pay $8 billion in cash for cancer drug specialists Loxo Oncology (LOXO) in the second major pharmaceutical sector deal of the year.

The deal will see Eli Lilly pay $235 for each Loxo share, a price that represents a 68% premium to the stocks' Friday closing price of $139.87. The transaction is not subject to any financing condition and is expected to close by the end of the first quarter of 2019, the companies said. The takeover comes just days after Bristol-Myers Squibb Co. (BMY) agreed to buy Celgene Corp. (CELG) in a deal that values the group at $74 billion.

In Europe, the Stoxx 600 benchmark opened firmly higher, but faded to 0.41% decline by mid-day as markets in Germany and France gave back earlier gains and Britain's FTSE 100 fell 06% in the face of a firmer pound sterling. 

Stocks in Asia were firmer, however, with Japan's Nikkei 225 posting the biggest single-session advance -- a 2.44% gain that took the benchmark over the 20,000 point threshold -- even as the yen held at 108.20 against a weakened U.S. dollar. The region-wide MSCI Asia ex-Japan index added 1.28%, thanks to a 0.72% gain for the Shanghai Composite and a 1.34% advance for the KOSPI in South Korea.

Away from equities, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.3% lower at 95.88 following Powell's dovish Friday tilt, although benchmark 10-year U.S. Treasury yields rose 3 basis points to 2.659% as investors focused on the underlying wage and job creation data from the Labor Department.

That said, the CME Group's FedWatch tool suggests traders aren't pricing in any rate hikes for 2019, and suggest only a 3.2% chance of a January 2020 move that would lift the Fed Funds rate from its current 2.25% to 2.5% range.

Global oil prices were also on the march Monday, lifting both Brent and WTI crude to fresh three week highs following the stronger-than-expected jobs data from the U.S. last week and the renewed efforts from China to prime growth in the world's biggest energy consumer.

Brent crude contracts for March delivery, the global benchmark, were marked $1.35 higher from their Friday close in New York and changing hands at $58.41 per barrel while WTI contracts for February were marked $1.14 higher at $49.10 per barrel.