Monday November 4th

4-11-2019

Dow futures point to record open, rise more than 100 points on US-China trade optimism

U.S. stock index futures rose Monday, boosted by optimism around a potential U.S.-China trade deal. Dow Jones Industrial Average futures pointed to a record open for the 30-stock index, rising 131 points. The Dow closed Friday’s session just 0.2% below its all-time high. S&P 500 and Nasdaq 100 futures also pointed to solid gains at the open. U.S. Commerce Secretary Wilbur Ross said Sunday that American firms would be granted licenses to sell to Chinese telecom giant Huawei “very shortly.” Ross’ comments came after China said Friday it reached a consensus with the U.S. in principle following trade talks last week. China and the U.S. have been engaged in a trade war for more than a year, but expectations for a deal being signed have increased recently. Last month, President Donald Trump said both sides had come to a “very substantial phase one” trade agreement that is expected to be signed later in November. The S&P 500 and Nasdaq Composite reached record highs last week after the Federal Reserve signaled it will not raise rates for the foreseeable future. However, the U.S. central bank also raised the bar for further rate cuts moving forward. The Fed cut interest rates by 25 basis points on Wednesday. That was the Fed’s third rate cut of the year. A strong U.S. jobs report out Friday also supported risk appetite with stocks. The U.S. economy added 128,000 jobs in October, the Labor Department said Friday. “We stay constructive, looking for new highs before the next US recession strikes,” Mislav Matejka, head of global and European equity strategy at J.P. Morgan, wrote in a note. “Historically, recessions have tended to follow the trough in the unemployment rate by a year on average,” Matejka wrote. “In other words, one needs to see the unemployment rate rising for a while to believe in a sustained slowdown.” Meanwhile, the corporate earnings season has largely been better than expected. Seventy-five percent of the 360 S&P 500 companies that have reported have surpassed analyst expectations, FactSet data shows. Under Armour posted Monday quarterly numbers that topped analyst expectations. However, the stock fell more than 11% in the premarket after the company cut its 2019 revenue forecast, citing lower inventories and problems around its direct-to-consumer channels. Uber Technologies and Shake Shack are among the companies set to report after the close Monday. Shares in Asia Pacific rose on Monday amid optimism on the U.S.-China trade front. Mainland Chinese shares advanced on the day, with the Shanghai composite up 0.58% to about 2,975.49 and Shenzhen component gaining 0.67% to 9,868.13. The Shenzhen composite also advanced 0.592% to around 1,646.70. In Hong Kong, the Hang Seng index jumped 1.38%. Elsewhere, South Korea’s Kospi advanced 1.43% to close at 2,130.24. Markets in Japan were closed on Monday for a holiday. Oil prices crept upwards on Monday, with Brent reaching its highest in more than a month after the previous day’s boost from growing expectations of a U.S.-China trade deal. Brent crude futures for January rose 84 cents to $62.53 a barrel , erasing earlier losses and reaching peaks last seen on Sept. 27. December U.S. crude futures also swung back into positive territory, up 67 cents at $56.88 a barrel. Gold prices were steady on Monday as the dollar eased on soft manufacturing survey, while signs of a U.S.-China trade deal stoked risk appetite, capping gains for the safe-haven bullion. Spot gold was steady at $1,513.19 per ounce, as of 0747 GMT, after dipping 0.2% earlier in the session, while U.S. gold futures were up 0.3% at $1,515.30 per ounce.