Monday May 21st

21-05-2018

Dow is set to leap more than 200 points at the open after US-China trade war is placed 'on hold'

U.S. stock index futures futures pointed to strong gains at the open Monday, after Treasury Secretary Steven Mnuchin said the prospect of a trade war was "on hold" following an agreement to suspend tariff threats. At 7:54 a.m. ET, Dow Jones industrial average futures rose 226 points, indicating a higher implied open of 238.91 points. Nasdaq 100 and S&P 500 futures also indicated an upbeat start to the session for their respective markets. The moves in premarket trade followed comments from Mnuchin and President Donald Trump's top economic advisor, Larry Kudlow, who both said the agreement reached by American and Chinese officials on Saturday helped set up a framework to address potential trade imbalances in the future. Mnuchin told CNBC on Monday the U.S. has made "very meaningful progress" with China on trade matters. "Now it's up to both of us to make sure that we can implement it," Mnuchin told "Squawk Box." On Saturday, negotiators from the world's two largest economies said they would continue talking about measures under which Beijing would import more energy and agricultural commodities from the U.S. in an effort to bridge the $335 billion annual U.S. goods and services trade deficit with China. "In our view the fundamentals remain attractive for further upside in equities stateside and globally in the months ahead so long as progress persists in trade talks with China," said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. Wall Street also got a boost Monday amid a slew of dealmaking news. General Electric will merge its transportation business with Wabtec — a rail equipment maker — in a deal worth $20 billion. GE shares rose 2.3 percent in the premarket. Meanwhile, Fifth Third Bancorp agreed to buy MB Financial for $4.7 billion in cash and stock. MB Financial shares surged 14 percent before the bell. Asian markets closed moderately higher on Monday, with weekend developments in U.S.-China talks, regarded as positive by analysts on the whole, in the spotlight. Japan's Nikkei 225 edged up by 0.31 percent, or 72.01 points, to 23,002.37, crossing the 23,000 mark for the first time since February as the dollar firmed against the yen. The Topix dipped in and out of negative territory before finishing lower by 0.08 percent. Over in South Korea, the Kospi reversed early losses, advancing 0.2 percent to close at 2,465.57. Greater China markets got a lift following positive trade developments at the weekend. Hong Kong's Hang Seng Index advanced 0.68 percent by 3:22 p.m. On the mainland, the Shanghai composite edged up by 0.66 percent to 3,214.36 and the Shenzhen composite added 1.05 percent to end at 1,848.06. Oil declined on Monday, surrendering early gains, although the prospect of an easing in trade tensions between the United States and China helped stem losses. Brent crude futures were down 35 cents at $78.16 a barrel by 1214 GMT, having retreated from a session high of $79.19. U.S. crude futures were down 2 cents at $71.26. Gold marked a new low for the year on Monday after U.S. Treasury Secretary Steven Mnuchin declared that a trade war between China and the United States was "on hold," sparking a rally in stocks and the dollar. Buoyancy in U.S. Treasury yields also weighed on appetite for non-interest bearing assets such as bullion, analysts said. Spot gold fell to its lowest since late December at $1,281.76 an ounce, and by 1138 GMT was down 0.5 percent at $1,285.11 an ounce. U.S. gold futures for June delivery were 0.5 percent lower at $1,284.40.