The Friday Market Minute

  • Global stocks rally sharply as Presidents Trump and Xi hint at potential trade deal later this month at the G-20 leaders' summit in Argentina.
  • Asia stocks rise to the highest level in nearly a month on trade deal speculation, offsetting concerns over weaker-than-expected holiday sales guidance from Apple
  • European stocks post solid gains ahead of ECB stress tests results for the region's biggest lenders, expected to key on Italian government bond risk, published later this morning.
  • Analysts expect the U.S. economy added 188,000 new jobs last month, but wages could rise at the fastest pace in nine years, adding upward pressure on bond yields and the dollar.
  • Apple shares slide 5.3% in overnight trading and are set to clip 80 points from the Dow at the start of trading, but futures still suggest a 220 point gain for the benchmark at the start of trading.

Market Snapshot

Global stocks rallied sharply Friday, lifting markets in Asia to the highest levels in nearly a month, as investors cheered news of a potential thaw in the U.S. China trade war and shrugged off disappointing fourth quarter earnings from Apple that could mark a major shift for the world's most valuable company.

A Thursday phone call between Presidents Donald Trump and Xi Jinping Thursday, as well as statements from Washington and Beijing, suggest the two sides could be moving closer towards a trade compromise when the pair meet later this month at the G-20 Summit in Argentina. Trump said that discussions were "moving along nicel" while Xi told state television that the two sides should "promote a plan that both can accept to reach a consensus on the China-U.S. trade issue."

Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina. Also had good discussion on North Korea!

— Donald J. Trump (@realDonaldTrump) November 1, 2018

The detente, which followed data showing U.S. export orders fell to the lowest level of the Trump Presidency last month and persistent signals of cooling factory activity in China, boosted global investor sentiment despite the worrying signals from Apple's (AAPL) fourth quarter earnings call, which cited slowing emerging market growth and a stronger U.S. dollar as factors affecting its weaker-than-expected December quarter outlook.

Japan's Nikkei 225 surged more than 2.55% as the yen weakened amid the regional optimism, which China's Shanghai Composite gained 2.7% to help boost the broader MSCI Asia ex-Japan benchmark 2.34% to the highest level in nearly a month. The yuan, as well, strengthened to 6.8970, the highest in three weeks, amid the trade deal speculation.

European stocks were also stronger at the start of trading Friday, with the Stoxx 600 rising 1.03% by mid-day in Frankfurt amid similar percentage gains for benchmarks around the region and ahead of 'stress test' results for the region's biggest lenders, which will be published later today by the European Central Bank.

U.S. futures look set for similarly strong gains, which contracts tied to the Dow Jones Industrial Average indicating a 315 point opening bell gain, despite what is expected to be a near 6% decline for Apple, the fourth-heaviest weight on the 30-stock average, which will clip around 90 points from the initial gains. Contracts linked to the S&P 500 suggest a 24-point advance for the broader benchmark while those tied to the Nasdaq Composite are marked 15 points higher, with tech names expected to hold down gains in the opening minutes of trading. 

Starbucks (SBUX) shares surged in pre-market trading Friday after the world's biggest coffee chain posted stronger-than-expected fourth quarter sales and said its China business rebounded thanks in part to a delivery deal with online retailing giant Alibaba Group Holding (BABA) .

Starbucks also guided for full year 2019 adjusted earnings of between $2.61 and $2.66 per share, but noted that global comparable sales growth could come in at the lower end of current guidance of between 3% and 5%.

Starbucks shares were marked 8.2% higher in pre-market trading Friday, indicating an opening bell price of $63.45 each, a move that would boost the stock's year-to-date gain past 10% and value the Seattle, Washington-based chain at more than $86 billion.

Investors will first need to navigate today's employment report for the month of October, which is expected to show that U.S. employers added a net new 188,000 new jobs to the economy last month, a figure that's just below the 2018 average of 208,000 but strong enough to keep the headline unemployment rate at 3.7%, the lowest since 1969.

That said, wage data is likely to be a more important driver for both stock and bond markets today, with speculation that average hourly earnings may have accelerated to an annual pace of 3.1%, the fastest since April 2009 and a figure that could increase bets on faster Federal Reserve rate hikes, lift U.S. Treasury bond yields and boost the value of the U.S. dollar.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, extended declines from the 16-month high of 97.06 it reached earlier this week to trade at 96.115 in early European dealing, while benchmark 10-year Treasury notes were marked at 3.175%.

Global oil prices, however, extended declines in European trading, with investors again focused on the buildup in U.S. crude inventories, which hit 426 million barrels last week, and the output rates of the world's three biggest producers -- Saudi Arabia, Russia and the United States -- which are currently pumping 33 million barrels of crude each day, nearly a third of worldwide demand, that many see as offsetting the impact of Iran sanctions, which are due to kick in Sunday.

Brent crude contracts for December delivery, the global benchmark, were seen 5 cents lower from their Thursday close in New York and changing hands at $72.84 per barrel , extending their fourth quarter decline past 13%, while WTI contracts for the same month, which are more tightly liked to U.S gas prices, were marked 20 cents lower at $63.49 per barrel.