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Strength Overseas May Lead To Upside On Wall Street

The major U.S. index futures are pointing to a higher opening on Monday following the mixed performance last week. Early buying interest may be generated in reaction to strength in the overseas markets, which benefited from political news out of Europe.

Stocks turned in a mixed performance last Friday amid another round of downbeat economic data and news that online giant Amazon (AMZN) snapped up Whole Foods (WFM).

While the Nasdaq dipped 13.74 points or 0.2 percent to 6,151.76, the Dow edged up 24.38 points or 0.1 percent to 21,384.28 and the S&P 500 crept up 0.69 points or less than a tenth of a percent to 2,433.15.

The major averages also turned in a mixed performance for the week. Moving lower for the second straight week, the Nasdaq slid by 0.9 percent, but the Dow rose by 0.5 percent and the S&P 500 inched up by less than a tenth of a percent.

Traders were unfazed by the release of a government report showing a steep drop in housing starts for May. The Commerce Department said housing starts slumped by 5.5 percent to an annual rate of 1.092 million in May from the revised April estimate of 1.156 million.

The significant decline surprised economists, who had expected housing starts to climb to a rate of 1.215 million from the 1.172 million originally reported for the previous month.

There was also a decline in building permits, a measure of future building activity. That figure tumbled by 4.9 percent to a rate of 1.168 million in May from a revised 1.228 million in April.

Meanwhile, a second economic report indicated weak consumer attitudes, a bad sign for retail spending. The University of Michigan said its consumer sentiment index for June fell to 94.5. The index was expected to be unchanged at 97.1. The figure was the weakest since last November.

Amazon said it has agreed to buy grocery chain Whole Foods for $13.4 billion, as the online retailing giant aims to dominate the supermarket industry as well. Amazon shares jumped 2.3 percent, while Whole Foods surged up 30 percent.

Wal-Mart (WMT) announced an agreement to acquire Bonobos, one of the leading apparel brands built on the internet, for $310 million in cash. Wal-Mart closed flat.

Exxon Mobil (XOM) said it has made a final investment decision to proceed with the first phase of development for the Liza field, one of the largest oil discoveries of the past decade, located offshore Guyana.

Commodity, Currency Markets

Crude oil futures are inching up $0.13 to $44.87 a barrel after rising $0.28 to $44.74 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,251.10, down $5.40 from the previous session's close of $1,256.50. On Friday, gold rose $1.90.

On the currency front, the U.S. dollar is trading at 111.32 yen compared to the 110.88 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1178 compared to last Friday's $1.1198.

Asia

Asian stocks rose broadly on Monday as weaker-than-expected U.S. housing and consumer sentiment data tempered expectations for a spate of interest rate increases this year and French voters gave President Emmanuel Macron's party a solid victory in Sunday's second-round election.

Macron's party won a clear parliamentary majority, giving him a strong mandate in parliament to pursue his pro-EU, business-friendly reform plans.

Brexit negotiations with the European Union are set to begin today after Britain bowed to EU pressure for a formal opening to their long-awaited negotiations rather than first holding technical talks between civil servants.

Chinese stocks rose as liquidity conditions have eased and data showed the property market continued to stabilize in May after stricter measures to curb demand.

The benchmark Shanghai Composite Index climbed 21.85 points or 0.7 percent to 3,145.02, while Hong Kong's Hang Seng Index jumped 298.06 points or 1.2 percent to 25,924.55.

Japanese shares hit two-week highs amid yen weakness as data showed Japan saw a surprise trade deficit in May because of a rise in imports. The Nikkei 225 Index climbed 124.49 points or 0.6 percent to finish at 20,067.75, its highest level since June 5th. The broader Topix index closed 0.6 percent higher at 1,606.07.

Sony, DeNA, Toshiba, Advantest, Komatsu and Sumco were among the prominent gainers.

Meanwhile, Nomura Real Estate Holdings slumped after saying a stake purchase in the company by Japan Post is no longer being considered. Troubled airbag maker Takata plunged 16.5 percent on reports it is planning to file for bankruptcy.

Australian shares closed higher as strength in the financial sector outweighed weakness in the retail sector. The benchmark S&P/ASX 200 Index rose 31.20 points or 0.5 percent to 5,805.20, while the broader All Ordinaries Index closed up 27.50 points or 0.47 percent at 5,835.50.

The big four banks rose between 0.9 percent and 1.5 percent after executives from the banks urged senators to consider major changes to a proposed A$6.2 billion levy.

Newcrest Mining advanced 1.4 percent after the gold miner boosted its stake in London AIM-listed SolGold Plc. Baby food maker Bubs Australia jumped 21 percent after it signed a partnership deal with Chinese online sales portal Kaola.com.

Mining giants BHP Billiton and Rio Tinto ended on a flat note, while energy stocks turned in a mixed performance. Retailers JB Hi-Fi, Harvey Norman and Woolworths fell around 3 percent each.

Europe

European stocks have moved higher on Monday as French president Emmanuel Macron's party scored an overwhelming victory in the second round of parliamentary elections and Brexit talks got underway in Brussels.

While the U.K.'s FTSE 100 Index has risen by 0.5 percent, the German DAX Index is up by 0.9 percent and the French CAC 40 Index is up by 1 percent.

On a light day on the economic front, data from Eurostat showed that Eurozone construction output recovered in April after declining in March. Construction output rose 0.3 percent month-on-month in April, reversing a 1.1 percent fall in March.

Rolls-Royce shares have advanced in London. The engine maker said last week that it had started 2017 well, with all businesses performing in line with expectations.

Ocado shares have also soared on speculation the company could become an acquisition target for Amazon.

Novartis have moved higher on news the Swiss drug maker has received European approval for a blood cancer treatment known as Rixathon.

On the flip side, Cairn Energy has tumbled after the Indian Income Tax Department ordered coercive action against the company to recover Rs 10,247 crore of retrospective tax.

U.S. Economic Reports

The economic calendar for the week is relatively quiet, although traders are likely to keep an eye on reports on new and existing home sales and leading economic indicators.

At 5:30 pm ET, Chicago Federal Reserve President Charles Evans is due to speak at a Money Marketeers of New York University event in New York City.

Stocks In Focus

Shares of Clovis Oncology (CLVS) are moving sharply higher in pre-market trading after the biopharmaceutical company announced positive late-stage trial data for its ovarian cancer drug.

Biotechnology company Rigel Pharmaceuticals (RIGL) may also see early strength on news the FDA has accepted its application for the use of Tavalisse in patients with chronic or persistent immune thrombocytopenia.

Valeant Pharmaceuticals (VRX) is also seeing pre-market strength after billionaire hedge fund manager John Paulson was elected to the drug maker's board of directors.

On the other hand, shares of Seattle Genetics (SGEN) may come under pressure after the biotechnology company said it is halting a late-stage trial of trial of vadastuximab talirine in frontline older acute myeloid leukemia patients.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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