The Tuesday Market Minute

  • Global stocks trade firmly higher as investors cheer positive signals from U.S.-China trade talks and a tentative deal to avoid a second U.S. government shutdown.
  • European stocks book solid gains as the euro drifts to a two-and-a-half month low against the U.S. dollar, which is on it longest winning streak in three years.
  • Global oil prices edge higher, but remain range-bound amid the offsetting influence of record U.S. production, OPEC cuts and slowing global growth.
  • U.S. equity futures suggest a triple digit gain for the Dow ahead of earnings from Activision Blizzard, Under Armour and Molson Coors.

Market Snapshot

Global stocks extended gains Tuesday as investors reacted to preliminary agreement between rival U.S. lawmakers that would prevent another government shutdown later this week and cheered the positive signals from trade talks between Washington and Beijing.

Republican Senator Richard Shelby told reporters late Monday that a tentative deal had been reached with Democratic lawmakers to fund the U.S. government through the current financial year, which ends in September, but noted that it did not included the $5.7 billion for border wall funding demanded by President Donald Trump.

Trump made a passing reference to the deal last night during a rally in El Paso, but appeared to shrug off the lack of funding for his signature 2016 campaign promise, telling the supportive crowd "we'll build the wall anyway".

He also said he didn't want China to have a "hard time", in reference to ongoing trade talks between Washington and Beijing, while one of his close political allies, Kellyanne Conway, told the Fox News Channel that a meeting with China President Xi Jingping was still possible before the March 2 deadline for the talks to be completed.

The positive signals on both issues helped shares in Asia book solid gains, led by Japan's Nikkei 225, where traders returned from a Foundation Day holiday to a weaken yen, which helped the benchmark surge 2.6% by the close of trading to 20,864.21 points. The region-wide MSCI ex-Japan index, meanwhile, was marked 0.3% higher heading into the close of trading.

U.S. equity futures were also on the march, with contracts tied to the Dow Jones Industrial Average I:DJI indicating a 182-point opening bell gain while those linked to the S&P 500 I:GSPC were suggesting an 18 point advance for the broader benchmark.

The U.S. earnings calendar is relatively light Tuesday, although key reports are expected from video game maker Activision Blizzard (ATVI) - Get Report as well as Molson Coors Brewing (TAP) - Get Report , Occidental (OXY) - Get Report and Under Armour (UAA) - Get Report .

Molson Coors shares were marked 6.7% lower in pre-market trading after posted stronger-than-expected fourth quarter profits Tuesday but noted that "material weakness" in the way it accounted for deferred tax liabilities in statements from 2016 and 2017 will mean a collective $247.7 million hit to retained earnings for the 2017 year.

Under Armour (UAA) - Get Report posted stronger-than-expected fourth quarter earnings Tuesday, and confirmed its 2019 profit outlook, sending shares 1.3% higher in pre-market trading.

S&P 500 earnings are likely to contract by 0.2% 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, the first such move since 2016.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, touched a three-month high of 97.128 in overnight trading before paring gains into the early European session, sending the euro to its lowest levels in at least two-and-a-half months as investors searched for higher-yielding assets in markets around the world.

The dollar, paradoxically, has risen some 2% against its peers since the Federal Reserve softened its stance on rate hikes earlier this year, as 10-year risk-free government yields offer between 2.5% and 2.7% more than similar paper issued in Germany or Japan.

European stocks started the Tuesday session firmly, as well, with the Stoxx 600 rising 0.7% in the opening hour of trading in Frankfurt, led by bank and financial sector shares, while Germany's DAX performance, which is acutely sensitive to global trade signals, rose more than 1% in Frankfurt.

Global oil prices traded firmly higher Tuesday, rising in concert with firmer world equity markets, ahead of two key reports on the state of U.S. crude production later today along comments from Saudi Arabia's Energy Minister that output from OPEC's largest member will remain below target in the coming months.

The hint at Saudi cuts came just hours before OPEC's regular Monthly Oil Report, which showed the cartel trimming its global demand growth forecast to 1.24 million barrels per day, from a previous forecast of 1.29 million while simultaneously lifting its non-OPEC supply growth forecast by 80,000 barrels to 2.18 million barrels per day.

Brent crude contracts for April delivery, the global benchmark, were marked $1.40 higher from their Monday close in New York and changing hands at $62.91 per barrel while WTI contracts for March delivery -- which closed at the lowest level in two weeks yesterday -- were seen $1.21 higher at $53.62 per barrel.