The Friday Market Minute
- Global stocks hold gains despite confusion over the state of U.S. China trade progress and conflicting reports regarding the Treasury's intention on tariffs.
- Asia stocks test one-month highs on optimism that trade talks will bear fruit, with Japan leading the charge thanks to improved risk appetite and a weaker yen.
- Global oil prices jump after OPEC reports the biggest monthly drop in output in two years in December as it prepped for the start of 1.2 million in agreed production cuts in 2019.
- U.S. corporate earnings are running ahead of estimates early in the Q4 season, with strong bank reports helping drive a 21.8% bottom line growth rate, well ahead of the season's 14.2% estimate.
- U.S. equity futures indicate a modestly stronger opening on Wall Street ahead of December manufacturing data and fourth quarter earnings from Schlumberger, Sun Trust Banks and State Street.
Global stocks traded higher Friday as markets held onto gains sparked by a potential thaw in U.S.-China trade talks, despite contradictions from the Treasury, and added to risky positions following a solid start to the U.S. corporate earnings season.
The Wall Street Journal reported before the close of trading Thursday that the United States was considering rolling back tariffs on China-made goods in an effort to ensure that ongoing trade talks bear fruit prior to their March 1 deadline, sparking a late-hour surge on Wall Street. A Treasury spokesperson subsequently told CNBC, however, that no such proposal is in place, taking stocks from their session peaks.
The potential for a thaw in the talks, however, allowed markets in Asia to test one-month highs as the yen weakened against the U.S. dollar and investors returned to equities following a solid week in the region that included one of the biggest liquidity injections by the People's Bank of China in at least six years.
The region-wide MSCI Asia ex-Japan index was marked 0.71% higher into the close of trading Friday, taking its one-week gain to around 2.4%, while the Nikkei 225 ended 1.3% higher in Tokyo at 20,666.04 points.
Wall Street futures, however, suggest the trade optimism may not flow through into a second session, with early indications suggesting only a modesty gain of 130 points for the Dow Jones Industrial Average
Friday's earnings calendar includes quarterly updates from oil services provider Slumberger (SLS) as well as financial services groups State Street (STT) and Sun Trust Banks (STI) . Investors will also get key manufacturing output and capacity utilization data for the month of December at 9:15 eastern time.
Tesla Inc. (TSLA) shares were a notable pre-market mover, falling 6.8% after the clean energy carmaker said it will cut around 7% of its workforce, adding that fourth quarter profits will likely come in lower than in the previous three month period.
Netflix Inc. (NFLX) shares were also indicated lower in pre-market trading after the online streaming entertainment service topped Wall Street forecasts with its fourth quarter earnings report, but noted that U.S. price increases wouldn't slow its cash burn rate until at least next year.
The fourth quarter earnings season has been relatively solid across the first two weeks, with more than three quarters of the 44 S&P 500 companies reporting topping analysts' estimates. Actual earnings growth is a robust 21.8% so far, according Refinitiv I/E/B/S data, firmly ahead of the 14.2% season estimate, while revenues had grown by 7.9%.
European stocks were firmly higher by mid-day in Frankfurt, following across-the-board gains in Asia, with the Stoxx 600 rising 1.4% and the export-sensitive DAX performance index in Germany rising 1.03%.
Britain's FTSE 100, too, gained 1.54% despite both the uncertainty surrounding the ongoing Brexit deadlock -- including the refusal of either the government or the opposition to engage in talks -- and the counter-intuitive strength in the pound, which traded a at two-month high of 1.3001 overnight before paring gains to around 1.2942.
Global oil prices were marked firmly higher in the early European trading session, with traders citing OPEC's monthly oil report and details showing a 751,000 barrel per day reduction in December output, the biggest in two years, as adding to the bullish tone triggered by U.S-China trade rumors.
Brent crude contracts for March delivery, the global benchmark, were marked 88 cents higher from their Thursday close in New York and changing hands at $62.06 per barrel while WTI contracts for February were marked 81 cents higher at $52.88 per barrel.