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Beyond the Numbers

Futures Pointing To Higher Open Ahead Of Chinese Press Conference
12/13/2019 8:59 AM

The major U.S. index futures are currently pointing to a higher opening on Friday following the strong upward move seen in the previous session.

The markets may continue to benefit from optimism about a U.S.-China trade agreement amid reports the economic superpowers have reached a phase one deal in principle.

However, a report from CNBC says Chinese officials are set to hold a press conference regarding the trade talks just as the U.S. markets open for trading.

Reaction to the press conference is likely to drive early trading, as Beijing has thus far been silent regarding the latest reports of a trade deal.

With the focus on trade news, traders do not seem to be paying much attention to a report from the Commerce Department showing U.S. retail sales rose by much less than expected in the month of November.

With traders expressing renewed optimism about a U.S.-China trade deal, stocks moved sharply higher over the course of the trading session on Thursday. The major averages fluctuated after an early rally, but the Nasdaq and the S&P 500 still ended the session at new record closing highs.

The major averages all finished the day firmly in positive territory. The Dow advanced 220.75 points or 0.8 percent to 28,132.05, the Nasdaq climbed 63.27 points or 0.7 percent to 8,717.32 and the S&P 500 jumped 26.94 points or 0.9 percent to 3,168.57.

The early rally on Wall Street came after President Donald Trump expressed optimism about a potential U.S.-China trade deal.

"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" Trump said in a post on Twitter just after the start of trading.

Trump has repeatedly expressed optimism about a trade deal but has previously suggested China wants to reach an agreement more than the U.S.

Stocks subsequently gave back some ground but moved back to the upside after reports said negotiators have agreed on the terms of a phase one trade deal that now requires Trump's approval.

The latest developments on the trade front come as Trump is meeting with top trade advisers today to discuss current plans to raise tariffs on $160 billion worth of Chinese goods on December 15th.

A report from Reuters said officials circulated talking points ahead of the meeting downplaying the repercussions the new tariffs would have on the U.S. economy.

Three sources familiar with the plans told Reuters the senior trade advisers are expected to present divergent views during the high-stakes meeting, with the final decision up to Trump.

Reports earlier this week suggested the U.S. would likely delay imposing the new tariffs to avoid agitating China amid an ongoing negotiations toward a phase one trade deal.

The news on the trade front largely overshadowed a report from the Labor Department showing initial jobless claims spiked to a two-year high in the week ended December 7th.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the jump in jobless claims "most likely reflects seasonal adjustment problems around the Thanksgiving holiday rather than a genuine sudden deterioration in labor market conditions."

A separate Labor Department report showed U.S. producer prices came in unchanged in the month of November, as higher prices for goods offset lower prices for services.

Energy stocks moved sharply higher over the course of the trading session, as positive signs regarding a potential U.S.-China trade deal boosted optimism about the outlook for demand.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index soared by 3.2 percent and 3.1 percent, respectively.

Substantial strength also emerged among banking stocks, as reflected by the 2.9 percent spike by the KBW Bank Index. The index ended the session at its best closing level in well over a year.

Computer hardware, semiconductor, networking, and steel stocks also saw considerable strength, while commercial real estate and tobacco stocks bucked the uptrend.

Commodity, Currency Markets

Crude oil futures are climbing $0.64 to $59.82 a barrel after rising $0.42 to $59.18 a barrel on Thursday. Meanwhile, after falling $2.70 to$1,472.30 an ounce in the previous session, gold futures are inching up $1.90 to $1,474.20 an ounce.

On the currency front, the U.S. dollar is trading at 109.54 yen versus the 109.31 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1170 compared to yesterday’s $1.1130.

Asia

Asian stocks posted strong gains on Friday after China said it is committed to resolving trade issues and British Prime Minister Boris Johnson's Conservative Party claimed a robust majority in Parliament.

Chinese shares rallied as U.S. President Donald Trump's tweet that the U.S. and China are close to a "big" deal helped assuage investor concerns over an escalation in the trade conflict.

The benchmark Shanghai Composite Index jumped 51.98 points, or 1.8 percent, to 2,967.68, while Hong Kong's Hang Seng Index soared 693.62 points, or 2.6 percent, to 27,687.76.

Japanese shares surged to a 14-month high as semiconductor-related shares extended their rally on reports that Washington and Beijing had reached a "phase one" trade deal in principle.

Investors shrugged of the Bank of Japan's quarterly Tankan Survey on business sentiment showing that large manufacturing in Japan weakened again in the fourth quarter of 2019. The diffusion index stood at 0 - shy of expectations for +3 and down from +5 in the three months prior.

A separate report showed Japanese industrial production declined more than initially estimated in October. Industrial production fell 4.5 percent month-on-month in October. According to the initial estimate, production had decreased 4.2 percent.

The Nikkei 225 Index spiked 598.29 points, or 2.6 percent, to 24,023.10, hitting its highest levels since October last year. The broader Topix finished 1.6 percent higher at 1,739.98.

Chip-related shares extended recent gains on hopes that the tech industry is bottoming out. Taiyo Yuden, Advantest, TDK Corp. and Tokyo Electron soared 3-6 percent. Financials and non-ferrous metal companies also posted strong gains.

Australian markets advanced, with metal and mining stocks leading the surge on hopes that a U.S.-China trade deal would offer some relief to top metals consumer China's slackening growth.

The benchmark S&P/ASX 200 Index climbed 30.90 points, or 0.5 percent, to 6,739.70, while the broader All Ordinaries Index ended up 33.80 points, or 0.5 percent, at 6,844.60.

Mining heavyweights BHP and Rio Tinto rallied 1.9 percent and 1.6 percent, respectively, while smaller rival Fortescue Metals Group jumped 2 percent.

Commonwealth Bank of Australia rose 0.4 percent after it flagged additional payments to current and former employees who were found in a review to have been underpaid. The other three big banks rose between 1.4 percent and 2 percent.

Energy stocks such as Origin Energy and Woodside Petroleum gained over 1 percent after oil prices scaled three-month highs.

Lynas Corp. soared 8.9 percent after the company said it submitted a tender in response to the U.S. Department of Defense's call for proposals to build a heavy rare earths separation plant.

On the other hand, gold miners suffered heavy losses, with Evolution Mining down 7.8 percent and Northern Star Resources losing 6.1 percent.

Seoul shares hit a seven-month high, with the benchmark Kospi climbing 32.90 points, or 1.5 percent, to 2,170.25 on the back of reports that China has reached the first phase of a trade deal with the U.S.

The White House has agreed to suspend some tariffs on Chinese goods and reduce others in return for Beijing's pledge to hike purchases of U.S. farm products in 2020, media reports said citing sources.

Europe

European stocks have surged on Friday to hover near record highs and the pound staged its biggest rally in almost three years after the ruling Conservative party secured a landslide victory in the snap election, ending the Parliamentary deadlock and making it possible to deliver Brexit by the end of January.

The results suggest that Prime Minister Boris Johnson could push his Brexit deal through Parliament and take the United Kingdom out of the European Union by the January deadline. The outcome is likely to bring an end to the Brexit deadlock in Parliament that has paralyzed the country.

Investors also cheered media reports suggesting that Washington has offered to slash existing tariffs and cancel new ones set to take effect Sunday as part of a deal to boost Chinese purchases of U.S. farm goods and obtain other concessions. Reports say that the terms have been agreed but the legal text has not yet been finalized.

Both sides are yet to formally confirm the news ahead of a Sunday deadline, when new U.S. tariffs on $160 billion in Chinese goods are due to take effect.

While the U.K.’s FTSE 100 Index has jumped by 1.8 percent, the French CAC 40 Index and the German DAX Index are both up by 1 percent.

Aareal Bank has moved notably higher after its supervisory board approved renewal of the appointment of Chief Financial Officer Marc Hess as a member of the Management Board of the company early, until 31 December 2024.

Online food delivery service Delivery Hero has soared after the company agreed to buy an 82 percent stake in South-Korean food delivery platform Woowa Brothers Corp. in a cash and stock deal.

Gold miner Centamin has also risen. The company has announced the appointment of Ross Jerrard as interim Chief Executive Officer, effective immediately. The company also appointed James Rutherford as Deputy Non-Executive Chairman, effective January 1, 2020.

Meanwhile, Henkel AG & Co. KGaA has tumbled after the chemical and consumer goods company said it expects earnings to be negatively impacted in fiscal year 2020 because of an uncertain industrial environment and investments in marketing and advertising.

U.S. Economic Reports

A report released by the Commerce Department on Friday showed retail sales in the U.S. rose by far less than economists had anticipated in the month of November.

The Commerce Department said retail sales edged up by 0.2 percent in November after climbing by an upwardly revised 0.4 percent in October.

Economists had expected retail sales to climb by 0.5 percent compared to the 0.3 percent increase originally reported for the previous month.

Excluding an increase in auto sales, retail sales inched up by 0.1 percent in November after rising by 0.3 percent in October. Economists had expected ex-auto sales to increase by 0.4 percent.

Meanwhile, a separate report from the Labor Department showed U.S. import prices increased in line with economist estimates in the month of November, largely reflecting a rebound in fuel prices.

The report said import prices rose by 0.2 percent in November after falling by 0.5 percent in October. The rebound in prices matched economist estimates.

The Labor Department said export prices also edged up by 0.2 percent in November after slipping by 0.1 percent in the previous month. Economists had expected export prices to inch up by 0.1 percent.

At 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of October. Inventories are expected to rise by 0.2 percent.

New York Federal Reserve President John Williams is due to speak at the Borough of Manhattan Community College in New York at 11 am ET.

Stocks In Focus

Shares of Sarepta Therapeutics (SPRT) are moving sharply higher in pre-market trading after the FDA approved the drugmaker’s second treatment for Duchenne muscular dystrophy.

Software company Adobe (ADBE) may also see initial strength after reporting fiscal fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Oracle (ORCL) may come under pressure after the business software giant reported fiscal second quarter earnings that beat estimates but on weaker than expected revenues. Oracle also provided disappointing guidance.
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