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The Monday Market Minute

  • Global stocks surge as White House says U.S. and China reach 90-day truce on tariffs, Beijing says "important consensus" reached on trade at G20 summit in Argentina.
  • Oil rises more than 5% on news that OPEC will pursue 2019 production cuts at this week's meeting in Vienna, while U.S.-China trade breakthrough boosts bullish sentiment in beaten-down commodities.
  • European stocks gain more than 1% as trade concerns ease, Italy budget crisis subsides, and German car stocks roar ahead following U.S.-China detente.
  • U.S. equity futures surge, with the Dow poised to gain more than 430 points at the opening bell, as investors brace for an early-December rally punctuated by a Wednesday market close to observe the passing of former President George HW Bush.

Market Snapshot

Global stocks surged Monday, lifting U.S. equity futures firmly into the green, after President Donald Trump proclaimed a 90-day "truce" in the still-simmering trade war between Washington and Beijing following this weekend's G20 Summit in Argentina, laying the groundwork for a solid December rally in markets around the world. 

A White House statement late Saturday said Trump will hold off on increasing tariffs on China-made goods, which were set to kick-in on January 1, for at least 90 days as the two sides negotiate a settlement on myriad trade, technology transfer and intellectual property theft disputes that have eroded relations for must of the past year. China's state-run newspaper said the agreement was an "important consensus", but made no reference to a 90-day time frame and did not corroborate some of the specifics mentioned in the White House communique. China's Foreign Ministry, however, told reporters Monday that it had been instructed to examine the removal of all trade tariffs between the two countries.

President Xi and I have a very strong and personal relationship. He and I are the only two people that can bring about massive and very positive change, on trade and far beyond, between our two great Nations. A solution for North Korea is a great thing for China and ALL!

— Donald J. Trump (@realDonaldTrump) December 3, 2018

"The agreement between Presidents Trump and Xi at the G20 is a deferment of disaster rather than a fundamental rebuilding of the trading relationship between the U.S. and China," said Ian Shepherdson of Pantheon Economics. "The lesson of Saturday night is that both sides want to avoid catastrophe, but neither is hurting badly enough-yet-to make substantial immediate concessions. " 

My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!

— Donald J. Trump (@realDonaldTrump) December 3, 2018

Nonetheless, a thawing of relations between the world's two biggest economies, alongside last week's signals of slower interest rate hikes from the Federal Reserve, looks to have set the table for an impressive near-term rally in a week that will see U.S. markets closed on Wednesday to observe the passing of former President George Herbert Walker Bush. 

Early indications from U.S. futures suggest investors are set to lift stocks firmly higher at the start of trading Monday, with contracts tied to the Dow Jones Industrial Average suggesting a 440-point opening bell gain while those linked to the S&P 500 are indicating a 38-point jump for the broader benchmark. Nasdaq Composite futures suggest a 152-point surge for the tech-heavy index.

Apple Inc.'s (AAPL) European supply chain, as well as its German-listed units, surged in early Frankfurt trading Monday as investors bet that a truce in the U.S.-China trade war will eliminate a key tariff risk that had been lingering over the world's most valuable tech company

Apple's U.S.-listed stocks was marked 3.23% higher in pre-market trading in New York, indicating an opening bell price of $184.34, a move that would be its biggest gain since August 1 and value the Cupertino, Calif.-based tech giant at just over $882 billion.

European socks were notably higher at the start of trading, with auto stocks leading the advance, taking the Stoxx 600 benchmark 1.25% into the green by mid-day and lifting the DAX performance index 2.21% from Friday's close in Frankfurt.

#Germany's Dax jumps 2.5% as Auto stocks set for best day in 2-1/2 yrs on Sino-US trade truce.

— Holger Zschaepitz (@Schuldensuehner) December 3, 2018

Britain's FTSE 100 added 1.64% on the back of higher oil prices, which boosted BP plc (BP) and Royal Dutch Shell (RDS.A) , as well as mining giants such as Glencore Plc (GLNCY) and BHP plc (BHP) and a weaker pound, which remained at 1.2755 despite the dollar's decline as investors continue to fret over the fate of Prime Minister Theresa May's Brexit deal in a parliamentary vote next week in London. 

Overnight in Asia, stocks surged across the board on news of the U.S.-China detente, with investors dumping the dollar and ploughing cash into risk markets around the region, taking the MSCI Asia ex-Japan benchmark 2.2% higher into the final hours of trading. Japan's Nikkei 225 rode a modestly weaken yen, as well as the broader bullish sentiment, to book a 1% gain and close at 22,574.76 points.

The improved risk sentiment also pushed government bond yield higher in key markets around the world, with 10-year German bunds rising 4 basis points to 0.38% while yields on benchmark 10-year Treasury notes were marked 3.5 basis point higher from their Friday levels at 3.035%.

Interesting moves in #bonds as #stocks surge. Yields on USTs are up across the curve, with both the 2- and 10-years 5-6 bps higher. One way to think about this is that the initial post #G20 reaction in #markets is a combo of pro-growth tilt with some revisit of #Fed dovishness.

— Mohamed A. El-Erian (@elerianm) December 3, 2018

Oil prices were also on the move, with futures at one point surging more than 5% on the back of the U.S.-China trade breakthrough, only to pare those gains modestly upon news that Qatar, a relatively small OPEC member that produces about 600,000 barrels of crude per day, will leave the cartel on January 1. That said, both Saudi Arabia and Russia, an non-OPEC state that nonetheless co-operates frequently with the group's agenda, agreed over the weekend G20 to push for an extension of current production cuts into 2019, adding further upward pressure to global oil prices.

"Regarding oil prices and our agreements. Yes, we have an agreement to extend the deal," Russia President Vladimir Putin told reporters Saturday in Argentina. "No final agreement has been reached on output, but we will work on this together with Saudi Arabia."

Brent crude contracts for January delivery, the global benchmark, were seen $2.19 higher from their Friday close in New York and changing hands at $61.62 per barrel while WTI contracts for the same month, which are more tightly liked to U.S gas prices, were marked $1.98 cents higher at $52.91 per barrel.