Monday April 1st

1-04-2019

Dow on track to kick off quarter 200 points higher on strong China data, trade progress

U.S. stock index futures rallied early on Monday as strong manufacturing data out of China eased worries of a possible global economic slowdown. At around 8 a.m. ET, Dow Jones Industrial Average futures pointed to a gain of 209 points at the open, while the S&P 500 and Nasdaq100 indexes were also in positive territory. A private survey showed the country's manufacturing activity expanded unexpectedly in March, at its fastest pace in eight months. The data sent the Shanghai Composite up more than 2.5 percent overnight. European shares also rose broadly. The figures gave some much-needed relief to investors unnerved of late by fears of a global economic downturn. Early last week, equities came under pressure as bond markets indicated an impending U.S. recession. The yield on the 10-year Treasury note recently dipped below that of the 3-month bill, in what's known as a yield curve inversion. A yield curve inversion is seen as a trusted predictor of a recession. "The cycle is extended, and the inverted curve has made us even more alert for trouble in the economy and financial markets, but we do not think trouble is imminent," Doug Peta, chief U.S. investment strategist at BCA Research, said in a note. "We are not dismissing the inverted yield curve, but our other recession-indicator inputs are not confirming its warning. Given the Fed's new guidance, we expect that the next recession will not arrive before mid-to-late 2020." Monday's gains came after the S&P 500 notched last week its best start to a year since 1998 and its strongest quarterly performance since 2009. The broad index gained 13.1 percent in the first quarter, led by the technology sector. In other news boosting markets, the U.S. and China recently concluded their latest round of trade talks. U.S. officials last week said China had made proposals on a number of issues — including forced technology transfers — that go further than previous commitments. The two superpowers are set to resume talks in Washington this week. Both countries have targeted billions of dollars' worth of each other's goods with tariffs in their protracted trade dispute. Monday is a busy day on the data front. Sales at U.S. retailers fell in February for the second time in three months in another sign of a slowdown infecting broad swaths of the economy early in the new year. The saving grace? Sales in January were much stronger than originally reported. Retail sales dropped 0.2% last month, hurt in part by a severe cold spell across the country. Economists polled by MarketWatch expected sales to climb 0.3%. Manufacturing numbers, construction spending and business inventories due to be released later. Major markets in Asia surged on Monday following data released over the weekend that showed economic activity in China unexpectedly bouncing back in March. Mainland Chinese shares soared on the day, with the Shanghai composite up 2.58 percent to 3,170.36, while the Shenzhen component surged about 3.64 percent to 10,267.70. The Shenzhen composite jumped 3.571 percent to 1,755.67. Over in Hong Kong, the Hang Seng index was up 1.66 percent in its final hour of trading. The Nikkei 225 in Japan jumped 1.43 percent to close at 21,509.03. The Topix index also gained 1.52 percent to finish at 1,615.81. Over in South Korea, the Kospi added 1.29 percent to finish at 2,168.28. Oil rose on Monday, building on its largest first-quarter gains in nearly a decade, as tight supply and positive signs for the global economy supported prices. Brent crude for June delivery was up $1.12, or 1.6 percent, at $68.68 a barrel, having risen 27 percent in the January-March period. U.S. West Texas Intermediate futures rose 73 cents, or 1.2 percent, to $60.87 a barrel, after gaining 32 percent in the first quarter. Gold prices slipped on Monday as upbeat Chinese economic data and signs of progress in Sino-U.S. trade talks eased some concerns about a slowdown in economic growth and boosted appetite for riskier assets. Spot gold was down about 0.2 percent at $1,290.01 per ounce by 0750 GMT, after touching its lowest since March 8 at $1,286.35 on Friday. U.S. gold futures fell 0.3 percent at $1,294.80 an ounce. Share markets rallied after data showed factory activity in China unexpectedly grew for the first time in four months in March.