The Friday Market Minute
- Global stocks gain as investors look for near-term central bank support and ride stronger-than-expected U.S. retail sales data and better-than-forecast semiconductor earnings.
- China pledges domestic stimulus package, potentially paving the way for near-term rate cuts, while an ECB policymaker hints at a “significant” support plan at next month’s rate-setting meeting in Frankfurt.
- U.S. Treasury bond curve slopes positive, but 30-year yields hold near 2% and CME Group futures point to rising bets on a 50 basis point cut from the Fed next month
- Wall Street futures suggest solid opening bell gains ahead of July housing starts and building permits data at 8:30 am Eastern time and earnings from Deere & Co before the opening bell.
U.S. equity futures look set to end a volatile summer week on a high note Friday, as investors around the world climb back into risk markets amid increasing hopes of near-term support from major central banks and stronger-than-expected retail sales and earnings data from Wall Street.
Asia markets sparked the bullish Friday sentiment with modest gains around the region following news from China that it plans to roll-out a domestic stimulus package to support disposable incomes, a move seen as a potential step to broader assistance from the People’s Bank of China.
European stocks were also boosted by an interview in the Wall Street Journal yesterday in which European Central Bank policymaker Olli Rehn said the region needs an “impactful and significant” stimulus package from the Bank’s September meeting. The comments helped drive 10-year German bund yields to a fresh record low of -0.71% Friday as equity benchmarks around the Continent traded firmly in positive territory.
U.S. equity futures, meanwhile, suggest solid gain on Wall Street Friday following yesterday’s modest rally, with stronger-than-expected July retail sales data, an earnings beat and profit boost from Walmart (WMT – Get Report) and forecast-blasting numbers from chimpaker Nvidia Corp. (NVDA – Get Report) last night all combining alongside bets of deeper rate cuts next month from the Federal Reserve.
Contracts tied to the Dow Jones Industrial Average are now indicating a 244 point gain and those linked to the S&P 500 are suggesting a 26.8 point advance for the broader S&P 500.
CME Group futures, meanwhile, are indicating a 23.5% chance of a 50 basis point rate cut from the Fed when it meets in mid-September, up from just 3.1% earlier this week.
Comments last night from President Donald Trump during a visit to Morristown, New Jersey were also cited as adding to Friday’s positive tone as he repeated his assertion that the U.S. is having “very good discussions with China” and that he plans to speak with China President Xi Jinping in the near future.
“They very much want to make a deal,” Trump said. “I think the longer it goes the stronger we get … “I have a feeling (the current trade war) is going to go fairly short.”
Europe’s Stoxx 600 was marked 1.1% higher by mid-morning trading in Frankfurt, helped in part by a 1% gain for Germany’s DAX index and a two-week low of 1.1083 for the euro against the U.S. dollar.
Britain’s FTSE 100, which opened around 90 minutes later than its usual starting time owing to a glitch that delayed trading for the longest span in at least eight years, added 0.7% in London even as the pound jumped to a multi-week high of 1.2148 against the greenback.
Away from equities, the U.S. Treasury bond curve held onto its modestly positive slope in overnight trading as yield climbed following yesterday’s retail sales data and this morning’s solid gains in Europe, with 2-year notes marked at 1.521% and 10-year notes trading at 1.566%. Benchmark 30-year notes, which dipped under 2% for the first time on record Thursday, were last seen at 2.02%.
Global oil prices bounced higher, as well, as the session’s bullish tone drew traders into crude markets following this week’s volatile trading and headline pressures, which included grim economic data from Europe and China and an EIA report which showed a bigger-than-expected 1.6 million barrel buildup on domestic crude stocks.
Brent crude contracts for October delivery, the global benchmark, were seen 85 cents higher from their Thursday close and changing hands at $59.08 per barrel while WTI contracts for September, which are more tightly linked to U.S. gas prices, were marked 79 cents higher at $55.26 per barrel.