Tuesday June 4th

4-06-2019

Dow futures point to 200-point gain after China says trade dispute should be resolved with talks

U.S. stock index futures rose on Tuesday after China’s Commerce Ministry said the trade dispute with the U.S. should be resolved with dialogue. Around 8:15 a.m. ET, Dow Jones Industrial Average futures indicated a gain of 204 points at the open. Futures on the S&P 500 and Nasdaq 100 also pointed to gains at the open. The Chinese Commerce Ministry said in a post that the “differences and frictions between the two sides” should dealt with through talks, according to a Google translation. But the post also said talks “need to be based on mutual respect, equality and mutual benefit.” Wall Street took the comments as a sign maybe the country was easing up on its tough rhetoric of the last month. Sentiment was also lifted amid hope that President Donald Trump’s plan to slap tariffs on Mexican imports could be blocked by lawmakers. Republican lawmakers are discussing whether they may have to vote to stop the new tariffs on Mexican goods threatened by Trump, according to The Washington Post, citing people familiar with the matter. The report said GOP lawmakers are worried about the ramifications for businesses and consumers of the tariffs. Meanwhile, Mexican Foreign Minister Marcelo Ebrard said Tuesday he expects both countries to find common ground on immigration and trade. Shares of GM and Ford, companies who could take a hit under the new tariffs, both rose more than 0.5% before the bell. The 10-year Treasury note yield also rose, giving stocks a boost, after reaching its lowest level in 20 months on Monday. Yields have fallen sharply over the past month as investors worry that tighter trade conditions could lead to slower economic growth. Investors are also focused on monetary policy this week, with a flurry of central banks across the world set to announce whether to adjust interest rate settings. Fed Chair Jerome Powell, Governor Lael Brainard and Dallas Fed President Robert Kaplan are all scheduled to speak Tuesday. Meanwhile, comments from the Federal Reserve on Monday raised expectations that the U.S. central bank is moving closer to a rate cut. St. Louis Federal Reserve president James Bullard said Monday a U.S. interest rate cut “may be warranted soon ” given the rising risk to economic growth posed by global trade tensions as well as weak U.S. inflation. On the data front, factory orders for April will be expected at around 10 a.m. ET. The Nasdaq fell into correction territory on Monday amid reports the U.S. government is planning to target a host of big companies in the industry with antitrust and business practice probes. Shares of Alphabet, Amazon, Facebook, and Apple all weighed on the market in the previous session. Amazon, Apple and Alphabet traded slightly higher in the premarket Tuesday. Facebook dipped 0.1%, however. Chinese stocks declined on Tuesday, while other major Asian markets were largely unchanged amid ongoing global trade tensions. The Shanghai composite declined 0.96% to finish its trading day at 2,862.28 and the Shenzhen component closed 1.23% lower at 8,748.27. The Shenzhen composite also fell 1.434% to close at 1,494.15. Over in Hong Kong, the Hang Seng index shed 0.7%. Japan’s benchmark Nikkei 225 closed just below the flatline at 20,408.54. The Topix index also finished its trading day largely unchanged at 1,499.09. In South Korea, the Kospi closed marginally lower at 2,066.97. Oil prices fell on Tuesday as an economic slowdown starts to dent energy demand, but markets won some support after Saudi Arabia said a consensus was emerging with other producers about extending supply cuts. Front-month Brent crude futures were at $60.97 at 0648 GMT. That was 31 cents, or 0.5%, below last session’s close. U.S. West Texas Intermediate (WTI) crude futures were at $53.05 per barrel, down 20 cents, or 0.4%, from their last settlement. Oil futures are around 20% below 2019 peaks reached in late April, with May posting the sharpest monthly declines since November. Other energy prices, like coal and gas, are also being hit hard by the downturn. Gold hit a more than three-month high on Tuesday as expectations rose that the U.S. Federal Reserve would cut interest rates to offset the impact on growth of the U.S.-China trade war, fueling demand. Lower interest rates cut the opportunity cost of holding non-yielding commodities, while gold also tends to benefit from growth concerns as an alternative to cyclical assets like stocks. Spot gold was 0.1% higher at $1,325.72 per ounce, after touching its highest since Feb. 27 at $1,328.98 in the previous session. U.S. gold futures were up 0.2% at $1,330.50 an ounce.