The Monday Market Minute

  • Global stocks extend gains, setting up Wall Street for a solid start to the week, as investors match the fading of key event risks against increasingly dovish central bank signals.
  • Europe stocks edge higher, with financial sector stocks the most active, as Deutsche Bank and Commerzbank Bank confirm talks over a potential merger.
  • The U.S. dollar index slides 0.18% in overnight trade ahead of the Fed's March policy meeting and speculation of a slowdown in sales off its $3.8 trillion balance sheet.
  • Global oil prices were little-changed, but are still testing four-month highs, as OPEC cuts and US sanctions continue to support markets despite demand concerns.
  • Dow futures suggest a 30-point opening bell gain ahead of housing data at 10:00 am Eastern Time and fourth quarter earnings from Tilray after the bell.

Market Snapshot

Global stocks edged higher Monday, setting up Wall Street for a solid start to the week, as investors combined signals of further interest rate easing from the world's biggest central banks alongside hopes for progress in U.S.-China trade talks and a conclusion to Britain's months-long Brexit saga into an extended bullish sentiment.

Boeing (BA - Get Report) shares, however, will clip around 80 points from the Dow Jones Industrial Average after extending declines in pre-market trading as investigators in Ethiopia said its probe into last week's deadly cash of the planemaker's 737 MAX 8 jet found "clear similarities" to the October crash of a Lion Air plane that killed 189 people.

The Federal Reserve will meet later this week in Washington, with investors anticipating another dovish statement from Chairman Jerome Powell that could include new information on the bank's $3.8 trillion balance sheet, whose unwinding has acted as a de-facto interest rate increase in the world's biggest economy.

The Bank of England will also gather this week in London, with Governor Mark Carney expected to reiterate the level of uncertainty surrounding the world's fifth largest economy as it moves towards the final weeks of its forty-year relationship with the European Union.

Alongside the European Central Bank's dovish pivot earlier this month, and consistent signals from the Bank of Japan over the need for further monetary stimulus, the canvas from central bank officials around the world continues to paint a dovish backdrop, which has offered consistent support for global equities as risks such as a "no deal" Brexit fade and trade talks between Washington and Beijing move patiently forward.

Much of that collective dynamic was at play in overnight Asia trade, with investors taking the Shanghai Composite index another 2.4% higher by the close of the session to extend the benchmark's year-to-date gain past 28%. Japan's Nikkei 225 was also firmly higher, rising 0.62% to 21,584.50 points even as data indicated yet another slowdown in exports last month from the world's third largest economy.

Early indications from U.S. equity futures suggest some of that momentum will carry over into Wall Street trading, albeit at a slower rate, with contracts tied to the S&P 500, which has advanced nearly 13% so far this year, indicating a 3 point bump higher.

Contracts linked to the  Dow Jones Industrial Average suggesting a 30 point pullback thanks to a 3% slide for Boeing (BA - Get Report) shares, which will take 80 points from the average and extend the stock's decline since the March 10 tragedy to around 13%. 

European stocks were also stronger at the start of trading Monday, with the Stoxx 600 grinding 0.21% higher by mid0day as benchmarks around the region booked marginal gains across the board.

The larger story in the region, however, centered around the potential merger of German lenders Deutsche Bank (DB - Get Report) and Commerzbank (CRZBY) , both of which confirmed talks of a tie-up this weekend that would create one of the biggest lenders in Europe.

Deutsche Bank shares were marked 3.6% higher at the start of trading to change hands at €8.10 each, which Commerzbank gained 4% to trade at €7.42 each.

Global oil prices, however, were muted in overnight trading as traders fretted over slowing global demand following weaker-than-expected readings last week for U.S. manufacturing, an IEA report that made no changes to its 2019 demand forecasts and the lowest level of domestic drilling installations since April 2018.

However, ongoing sanctions on the sale of Venezuelan crude, as well as comments from Saudi Arabia and Russia that suggest the OPEC cartel's 1.2 million barrels per day in production cuts may be extended into the second half of the year, have largely offset both demand concerns and record levels of U.S. production, taking oil prices to fresh four-month highs last week.

Brent crude contracts for May delivery, the global benchmark for oil prices, were marked 2 cents higher from their Friday close and changing hands at $67.18 per barrel while WTI contracts for April delivery, which are more tightly linked to U.S. gasoline prices, were seen 18 cents lower at $58.34 per barrel, which is still the highest level since November 12.

 

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