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The Monday Market Minute

  • Global stocks mixed as U.S.-China trade talks resume this week in Beijing and investors eye developments in the final week of the corporate earnings season.
  • China stocks rise on the first day of trading after last week's lunar holidays, with data showing retail earnings rose 8.5% from last year, the slowest pace in a decade that underscored weakness in the consumer economy.
  • European stocks edge higher, thanks in part to a weaker euro, even as benchmark 10-year bund yields hold under 0.1%.
  • Oil prices mixed following last week's Baker Hughes rig count, which showed U.S. drillers added 7 installations last week as production held at a record 11.9 million barrels per day.
  • U.S. equity futures suggest an 86 point gain for the Dow ahead of earnings this week from Home Depot, Walmart, Macy's, Coke and Pepsi.

Market Snapshot

Global stocks traded cautiously higher Monday, with investors eyeing progress in this week's renewed U.S.-China trade talks while closing tracking the final weeks of the corporate earnings season as profit forecasts slump amid trade, growth and political tensions both at home and in markets around the world.

U.S. Treasury Secretary Steve Mnuchin, as well as Trade Representative Robert Lighthizer, arrived in Beijing for trade talks Sunday that will focus on structural reforms and intellectual property protections in the world's second largest economy as negotiators race to meet a March 2 deadline that could see tariffs on $200 billion worth of China-made goods increase to 25% and spark a fresh round of reactions in the dormant global trade war.

With that risk in mind, investors will also watch for any mention of China tariff risks from a host of retail-focused earnings this week, the final major round of profit reporting for the December quarter season, amid a slate that includes Walmart (WMT) , Home Depot (HD) , Coca-Cola (KO) , Pepsi (PEP) and Macy's (M) .

The first quarter forecasts are likely to be far more sensitive for markets, however, now that earnings projections for the first three months of this year have slipped into negative territory for the first time since 2016, according to Refinitiv data.

S&P 500 earnings are likely to contract by 0.1% in the first quarter of this year, Refiintiv estimates, compared to a 26.5% growth rate over the same period last year, before rebounding only modestly to 3.6%. The weakness has raised the prospect of a so-called earnings recession -- where profits decline for two consecutive quarters -- over the first half of this year.

U.S. investors will also focus on talks between Republican and Democratic lawmakers this week as the two sides attempt to broker an agreement that will prevent another government shutdown on Friday. President Donald Trump is still insisting that Congress approve $5.7 billion in border wall funding as part of a broader package of spending approvals that will keep the government operating until the end of the financial year in September, while Democrats remain adamant that border security can be achieved without what they deem as an unnecessary and inefficient project. 

Early indications from U.S. equity futures suggest modest gains at the start of trading Monday, with contracts tied to the Dow Jones Industrial Average indicating an 88 point advance while those linked to the S&P 500 are guiding to a 9.8 point bump higher for the broader benchmark.

European stocks started the session higher, as a weaker euro and tech and basic resources stocks boosted the Stoxx 600 by 1% by mid-morning in Frankfurt while the FTSE 100 in London gain a similar amount as the pound slid to 1.2899 after the weakest reading for December GDP in more than three years. 

Overnight in Asia, China market jumped more than 1.2% on the first day of trading following last week's lunar New Year celebrations while markets in Japan were closed for National Foundation Day.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, held at a six-week high of 96.83 in early European trading as investors directed cash into higher-yielding safe-haven assets amid signals of slowing economic growth.

The euro, which has fallen around 2.5% so far this year, was marked at 1.1318 against the dollar as benchmark 10-year German bund yields traded under 10 basis points -- the lowest level in more than two years -- for the second consecutive session following last week's sharp decline in Eurozone growth forecasts from the European Commission.

Global oil prices were mixed, as well, in the week's opening trading session, with traders citing Friday's Baker Hughes rig count, which showed U.S. drillers added 7 installations last week while EIA data showed production held at a record 11.9 million barrels per day, as weighing on prices.

Brent crude contracts for April delivery, the global benchmark, were marked 10 cents higher from their Friday close in New York and changing hands at $62.20 per barrel while WTI contracts for March were seen 21 cents lower at $52.51 per barrel, extending their February decline to around 5.5%.