The Friday Market Minute

  • Global stocks ride gains across the board as sentiment improves following plans for the U.S. and China to re-start trade talks.
  • China gains were capped, however, by Tweets from President Trump and data showing government investment slowed in the eight months ending in August.
  • U.S. dollar slips following softer factory gate and consumer price data this week, suggesting Fed may have more time to gradually move on interest rates
  • Global oil prices extend weekly gains as Iran sanctions offset recent increases in OPEC production rates
  • U.S. stock futures look set to drive Dow Jones Industrial Average to open at a seven-month high as investors extend history's longest bull market.

Market Snapshot

Global stocks look set to close out the week on a high note, with news of potential trade talks between the U.S. and China, as well as a lull in emerging market volatility, reviving sentiment for risky assets and setting up U.S stocks for another day of record highs.

China said Thursday it had received an invitation from Treasury Secretary Steven Mnuchin to re-start talks, and noted that the two sides were working out details as to how and when the new meetings would take place, suggesting a White House plan to slap tariffs of between 10% and 25% on $200 billion worth of China made goods, a figure President Donald Trump has suggested could rise past $500 billion, may be delayed until after the November mid-term elections.

However, gains for stocks in China were capped by some mixed economic data, particularly linked to government investment, and a suggestion from President Trump that any advance on trade talks made by Secretary Steven Mnuchin could be disrupted by the White House. Trump Tweeted Thursday that the U.S. was under "no pressure" to make a deal with China, noting that markets in the world's second largest economy are "collapsing".

The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?

— Donald J. Trump (@realDonaldTrump) September 13, 2018

The state-run China Daily newspaper hit back Friday, writing that the Trump Administration "should not be mistaken that China will surrender to the U.S. demands" and that the country has "enough fuel to drive its economy even if a trade war is prolonged".

Still, the MSCI Asia ex-Japan index, the broadest measure of regional share prices, was marked 1.23% higher heading into the final hours a trading, a move that would take the benchmark's five-day gain to around 0.77%, a solid advance given the trade-related concerns that hung over the region in the early part of the week and the fact that shares hit a 14-month low on Wednesday.

Japan's Nikkei 225, as well, carved out a 1.2% advance to close at 22,094.67 points as the yen weakened amid the session's "risk on " sentiment, although the benchmark remains down just under 1% for the week.

European stocks got off to a solid start, even as the single currency rose to just over 1.1707 against a modestly weaker U.S. dollar, with the Stoxx 600 benchmark gaining 0.4% in the opening minutes of trading, paced by similar percentage increases for markets in France and Germany.

U.S. stock futures were also looking at a robust start to the session, with contracts tied to the Dow Jones Industrial Average indicating a 40-point opening bell gain that would take it to a fresh-all seven-month high following yesterday's intra-day peak of 26,191.64 points. Contracts liked to the S&P 500 suggesting a 5.1 point gain for the broader benchmark following solid gains yesterday that were first built on a positive reception for Apple Inc.'s (AAPL) gala product launch and then extended by data showing that consumer inflation eased to 2.7% in August despite rising gasoline prices.

The tame CPI reading, which followed data on Wednesday which showed factory gate inflation slowed for the first time in 18 months, has trimmed gains for the U.S. dollar index, which has fallen more than 1.1% against a basket of six global currencies this week to trade at 94.45 during early European dealing. It's also taken some of the steam out of investor expectations for Fed rate hikes, and although the CME Group's FedWatch tool is still suggesting a 75% chance of a December move, that's down from just over 80% on Wednesday prior to the PPI release.

U.S. Treasury bond yields, however, are continuing to climb following a week where investors have had to take down $177 billion in new supply as part of the Administration's efforts to fund last year's $1.5 trillion in tax cuts. Benchmark 10-year yields were marked at 2.97% in early European trading, while 2-year notes were seen at 2.761%, just a few ticks from the highest since July 2008.

Global oil prices continued their week-long climb Friday, as well, with Brent crude contracts for November delivery, the global benchmark, adding 19 cents per barrel to change hands at $78.37 each, extending their week-to-date gain past 1.25% as investors weigh the impact of rising OPEC production rates against the impending sanctions on the sale of Iranian crude which are due to come into force in November.

WTI contracts for November delivery, which are more tightly linked to U.S. gasoline prices and domestic production data, were seen 36 cents higher at $68.77, following figures from the Energy Information Administration earlier this week which showed output slowed to 10.9 million barrels per day -- which still makes the US the world's third-largest producer -- and crude stocks fell to the lowest level since 2015.