The Monday Market Minute

  • U.S. equity futures trade higher, putting the S&P 500 within touching distance of its all-time high, as trade sentiment and rate support boost global stocks.
  • USTR statement notes the U.S. and China are "close to finalizing" some portions of its phase-1 agreement, with Trump adding Beijing wants a deal 'badly'.
  • Fed futures suggest a 93% chance of a rate cut Wednesday, with focus then shifting to Friday's October employment report.
  • Busiest earnings week of the Q3 season sees 158 S&P 500 companies reporting this week, including tech giants Apple, Facebook and Google.
  • US equity futures suggest modest opening bell gains on Wall Street ahead of earnings from AT&T, Loews, Walgreens Boots Alliance and T-Mobile US.

Market Snapshot

Wall Street equity futures edged higher Monday, boosted by signals of further progress in U.S.-China trade talks and the expectation of rate cuts from the Federal Reserve later this week amid another wave of corporate earnings from heavyweights such as Apple (AAPL) - Get Report , Google (GOOGL) - Get Report and Facebook (FB) - Get Report

The U.S. Trade Representative's state late Friday, which touted that the two sides were " close to finalizing some sections of the agreement" and that "discussions will go on continuously at the deputy level, and the principals will have another call in the near future" suggests the so-called 'phase 1' aspect of U.S.-China trade talks could be completed ahead of next month's APEC summit in Chile, during which Presidents Donald Trump and Xi Jingping are expected to meet.

Trump, in fact, told reporters in Washington this morning that talks were "ahead of schedule" and that he expects to sign a "significant" portion of the agreement in Santiago. 

If the two leaders are able to advance talks beyond agricultural purchases, which have appeared to dominate the first phase of agreements, tariffs aimed at $156 billion worth of China made goods, which are expected to kick-in on December 15, could be paused or reversed, analysts have said, in what would be one of the more significant developments of the 16-month conflict. 

Further market support is likely to come this week from the Fed's October 30 rate decision, which is expected to see a 25 basis point reduction in the central bank's key lending rate -- currently sitting in a range of 1.75% to 2% -- and a pledge for additional reductions if the economy continues to cool into the final months of the year.

Corporate earnings are likely to dominate near-term sentiment, however, in the busiest week of the reporting season during which 158 companies are expected to update investors on their third quarter profits and current quarter outlooks.

With just under 40% of the S&P 500 reporting so far this season, earnings are expected to decline by around 2% from the same period last year, according to data from I/B/E/S data from Refinitiv, before rebounding to a 2.2% gain over the final three months of the year.

With those factors at play, U.S. equity futures are indicated higher Monday, as contracts tied to the Dow Jones Industrial Average suggest a 130 point opening bell gain while those linked to the S&P 500, which closed within touching distance of its all-time high on Friday, are priced for a 13 point bump to the upside.

The positive trade and rate sentiment was somewhat undermined, however, by the ongoing Brexit chaos in Britain, where the ruling Conservative Party is pressing for a snap election in order to cement its recently-agreed EU exit deal, while opposition lawmakers reject the move unless and until the risk of a so-called 'hard Brexit' is taken off the table.

EU officials are reportedly ready to extend Britain's October 31 Brexit deadline by a further three months, but the election impasse suggests the nation will continue to struggle to deliver a mandate that is now nearly three-and-a-half years old.

European stocks, meanwhile, were marked 0.05% higher by mid-day trading in Frankfurt  as grim earnings from HSBC plc (HSBC) - Get Report , the region's biggest bank, as well as the ongoing Brexit saga blunted sentiment. 

Away from equities, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.05% lower on the session at 97.78 as traders continued to price in a 93% chance of a Fed rate cut on Wednesday, while benchmark 10-year U.S. Treasury bond yields rose to a six-week high of 1.845% as global market sentiment improved from Friday's USTR statement.

Global oil prices were also modestly softer in early European trading after data from China showed weakening industrial profits, suggesting slowing near-term demand from the world's largest energy importer.

Brent crude contracts for December delivery were seen 16 cents lower from Friday's New York close to trade at $61.86 per barrel, while WTI contracts for the same month were marked 41 cents lower at $56.41 per barrel.