1. China cuts import tariffs - for everyone
China’s government approved reductions in tariffs on a broad range of imports worth nearly $400 billion a year, in what analysts saw as a preliminary step toward signing a phase-1 trade deal with the U.S. early in the new year.
The cuts address some of the most pressing issues in the Chinese economy such as high pork prices and access to medicines and parts for smartphones. They give no specific preference to U.S. goods but will pre-empt complaints by China’s other trade partners at the World Trade Organization by ensuring that they enjoy the same tariffs as the U.S. if and when the phase-1 deal is signed.
As such, the deal has a signalling effect that China remains wedded to an international rules-based order, something it hopes will improve its profile vis-à-vis the U.S. in the eyes of third parties.
2. Credit Suisse's new spying scandal
Credit Suisse (SIX:CSGN) is facing a growing public relations disaster after reports of a second instance of illegal surveillance of its executives.
The Swiss regulatory authority Finma has appointed an investigator to look into practises at the bank, after media reports disclosed that the bank had spied on its former HR director, only months after a similar episode involving wealth management head Iqbal Khan (who was on the verge of defecting to rival UBS at the time)
The bank in a statement said – again – that chief executive Tidjane Thiam had no knowledge of the surveillance, and said it had been lied to by a firm of detectives hired by former COO Pierre Olivier Bouee during its inquiry into the Iqbal Khan affair. Bouee, a long-time confidante of Thiam, had carried the can for that at the time.
3. U.S. stocks set to open higher; durable goods orders due
U.S. stock markets are set to edge up to new record highs after Friday’s record close and upbeat news on trade over the weekend.
In addition to the Chinese tariff cuts, President Donald Trump had said that a signing ceremony for the phase-1 deal is “being arranged” but provided no further detail.
By 6:30, Dow futures were up 78 points or 0.3%. S&P 500 Futures were up 0.5% while Nasdaq 100 futures were up 0.4%.
European markets were mostly flat, while Chinese markets had fallen slightly in the Asian session.
With no major earnings planned, the focus during the U.S. day will be on durable goods orders, which are due at 7:30 AM ET (1230 GMT) and new home sales data for November at 10 AM ET.
4. The 'Rise of Skywalker' falls flat
Walt Disney (NYSE:DIS) had a disappointing reception for its latest Star Wars movie, the Rise of Skywalker, taking in a "mere" $175 million at the box office across North America on its opening weekend.
That was well below the studio’s hopes of $200 million-plus, and suggested the trend of diminishing returns on the Star Wars franchise is unbroken.
According to The Wall Street Journal, receipts were 20% below those for “The Last Jedi” and 29% those for the 2015 release of “The Force Awakens”.
5. Europe breathes out as Russia, Ukraine sign gas deal
The threat of a major disruption to European gas supplies this winter was lifted after Russia and Ukraine signed a protocol that will allow for gas deliveries through Ukraine under a new contract next year.
The signing late on Friday came only days after the U.S. passed a bill sanctioning contractors on the Nord Stream 2 gas pipeline, a measure that is likely to delay that alternative route for Russian gas to Europe by some months.
The deal builds on tentative signs of progress in relations between the Ukraine and Russia, which have been in an undeclared state of war since 2014.
Top 5 Things to Watch on Monday, Dec. 23
1. House votes to impeach Trump
The House of Representatives voted to impeach President Donald Trump in a vote that went – as expected – almost entirely along party lines.
Trump will now face trial in the Senate, although the timing of that is still not clear. Reports suggest that House leader Nancy Pelosi will delay sending the articles of impeachment to the Senate, hoping to build pressure for key witnesses such as former National Security Advisor John Bolton to testify. Bolton was directed by Trump not to testify during the House’s impeachment inquiry.
Opinion polls suggest that the population is split equally between those who agree with impeachment and those who disagree. However, 75% of respondents agree that Trump’s pressure on Ukraine to investigate the son of Joe Biden was wrong, and 48% say they will definitely not vote for Trump in next year’s election, according to CNBC.
2. Stocks set to open flat; Nike's update eyed
U.S. stocks are set to open mixed again, with the pre-holiday mood becoming ever more apparent as the year drags to its end.
By 6:25 AM ET (1125 GMT), Dow futures were up 13 points, less than 0.1%, while S&P 500 Futures and Nasdaq 100 futures were both flat.
Weekly jobless claims, the Philly Fed index and existing home sales head the data calendar, while Accenture, Darden Restaurants and ConAgra are all due to report earnings before the open. The day’s biggest update, however, will come from Nike after the closing bell.
3. Micron's calling a bottom for memory chips
Chipmaker Micron (NASDAQ:MU) said the current quarter is likely to represent the bottom of the current cycle for memory chips, adding to hopes that the industry is turning a corner after suffering badly from the slowdown in China this year.
Micron’s stock rose 4.6% to a five-month high in after-hours trading, as the market looked beyond a fifth straight quarter of double-digit revenue declines that have crushed operating profit.
Elsewhere in the chip world, the Wall Street Journal reported that Broadcom (NASDAQ:AVGO) is looking to sell one of its wireless chip units in a deal that the WSJ said could fetch $10 billion. The company had said last week it would put wireless chips on a “standalone” basis outside its core operations
4. Bank of England to look through year-end slowdown
The Bank of England holds its first policy meeting since the general election, followed by Governor Mark Carney's press conference. Attention will be on whether the Bank looks beyond a string of extremely weak data readings in the last week which have spanned the housing market, construction sector, manufacturing and, earlier on Thursday, retail sales.
All those data pointed to businesses and consumer becoming more pessimistic ahead of the election, against a backdrop of prolonged uncertainty over the direction of Brexit. The Monetary Policy Committee will have to decide whether or not the withdrawal of the U.K. from the EU at the end of January will require more monetary stimulus. Analysts expect the MPC to remain split 7-2 in favor of holding the key rate at 0.75%.
5. Sweden ends the negative rates experiment, but other central banks are still cutting
There has, however, already been movement in other central bank rates Thursday. Sweden’s Riksbank voted to end its experiment with negative interest rates, raising its key rate from -0.25% to 0% on the grounds that inflation was close enough to target to justify the step. The bank has been worried that excessively low rates were fueling a housing bubble and household indebtedness.
Sweden follows Norway in raising rates this year, but those two are the conspicuous standouts in a global trend that is still towards easier policy. The Bank of Mexico is expected to cut its key rate when it meets later Thursday, a move made possible by the peso’s sustained strength against the dollar so far this year. Brazil, Russia, Turkey and India have also cut in the last couple of weeks.
The Bank of Japan, meanwhile, kept its policy unchanged at its meeting overnight.
1. House set to vote on articles of impeachment
The House of Representatives is to vote on sending two articles of impeachment to the Senate, setting the stage for only the third impeachment trial of a U.S. President in history.
The vote is expected to play out along partisan lines, after last-minute wavering by some Democrat representatives came to nothing. A vote in favor of impeachment will pave the way for a trial in the Republican-controlled Senate in the new year.
Given the GOP’s control of the Senate and the requirement for a two-thirds majority, the odds of Donald Trump being removed from office still appear low.
2. Peugeot, Fiat Chrysler agree on forming world's 4th biggest auto group
Fiat Chrysler Automobiles (NYSE:FCAU) and France’s Peugeot (PA:PEUP) formally agreed the terms of the merger that they proposed at the end of October, a deal that will create the world’s fourth-largest automotive group behind Toyota (NYSE:TM), Volkswagen (DE:VOWG_p) and General Motors (NYSE:GM). Shares in both companies rose modestly.
The terms of the deal remain largely unchanged, meaning that FCA shareholders will get their $6.1 billion special dividend before the deal closes, while Peugeot will distribute its 46% stake in components group Faurecia (PA:EPED) to its shareholders.
The two groups are still basing their business plan - 3.8 billion euros ($4.1 billion) in synergies within four years, on the assumption of no plant closures. They’ve finessed the awkward issue of the French state’s double voting rights by saying that these won’t be carried over to the new group. But all strategic shareholders will receive new double voting rights after three years.
3. Stocks to open mixed
U.S. stock markets are set for a mixed opening in the absence of major news overnight, and with market participants’ thoughts slowly turning toward the Christmas and New Year holiday period.
By 6:20 AM ET (1120 GMT), all three major indexes were up less than 0.1%, with Dow futures up 14 points, S&P 500 futures up 1.6 points and Nasdaq 100 futures up 4.4 points.
Stocks to watch later will include Pacific Gas & Electric (NYSE:PCG), which won court approval for its $13.5 billion plan to settle with fire victims, along with General Mills, which reports before the open. Chipmaker Micron is also due to report earnings.
4. German business sentiment hits six-month high
German business confidence, as measured by the Ifo research institute, hit its highest level in six months, another indication that Europe’s largest economy, highly exposed to external trade, is stabilizing as the U.S. and China move toward putting their trade dispute on hold.
The overall business climate index rose to 96.3 from an upwardly revised 95.1 in November, with both expectations and the assessment of current conditions improving – albeit in services more than in manufacturing.
Clemens Fuest, the ifo president, said the figures were “good news” but noted that manufacturing remains “fragile”.
Elsewhere, Eurozone consumer inflation was confirmed at 1.0% in November, with the core rate running at 1.3%, well below the European Central Bank’s target.
5. Inventories due as crude hits three-month high
The U.S. government will publish its weekly assessment of U.S. oil supplies at 10:30 AM ET, with analysts expecting a net drawdown of 1.288 million barrels in inventories. Private estimates by the American Petroleum Institute, which have shown at best a spotty correlation in recent weeks, suggested oil stocks rose by 4.7 million barrels last week.
U.S. crude oil prices are taking a breather after hitting $60 a barrel for the first time since September on Tuesday, on the back of upbeat U.S. economic data. By 6:20 AM they were at $60.48 a barrel, down 0.6%, while Brent futures were down 0.4% at $65.83.
Speculative long interest hit its highest level since May last week, as hedge funds drew comfort from the measures announced by the OPEC+ group to curtail supply in the first quarter. Even so, many expect the market to stay oversupplied in the first half of 2020. IHSMarkit said on Tuesday it expects Brent prices to average only $57/bbl next year.
1. Same old Boris
The British pound slumped as Boris Johnson put the risk of a no-deal Brexit firmly back on the table. U.K. media reported a source in Downing St. as saying that the government will change the law to make it impossible to extend the transition period after Brexit, which is set to end at the end of 2020.
Michael Gove, a senior ally of Johnson, said the aim was to “concentrate minds” rather than reintroduce the ‘cliff-edge’ scenarios that had spooked markets for most of this year. However, the EU’s chief negotiator Michel Barnier, has said it will be impossible to negotiate a comprehensive trade deal by then.
By 6:10 AM ET (1110 GMT), the pound had recovered to $1.3203, having fallen as low as $1.3159 initially. That’s around 0.4% above where it was before the Conservatives’ election victory was confirmed last Thursday.
2. U.S. housing starts, industrial production due
It’s a heavy data for U.S. economic data, and markets will be looking for hard data on building permits and housing starts in November (due at 8:30 AM ET or 1330 GMT) to corroborate the exuberance of the latest survey from the National Association of Home Builders. The NAHB survey index, released on Monday, rose to its highest in 20 years, against a backdrop of high employment, solid wage growth and low mortgage rates.
Housing starts have been running at their highest in a decade in recent months but are still well below pre-crisis levels.
Other data due later include industrial and manufacturing production for November at 9:15 AM and the JOLTS job openings survey for October at 10 AM.
There are also public appearances by Dallas Fed President Robert Kaplan at 8 AM, and his New York and Boston colleagues Eric Rosengren and John Williams at 12:30 PM.
3. Stocks set to open lower
U.S. stock markets are set to open slightly lower on the back of Boris Johnson’s unpleasant surprise for European markets, with Boeing's (NYSE:BA) decision to halt production of the 737 MAX in January also rippling through markets.
By 6:10 AM ET, Dow futures were down 64 points, or 0.2%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.1%.
Aerospace stocks in Europe suffered overnight as the companies in Boeing’s supply chain came under a harsh spotlight. France’s Safran (PA:SAF) fell 3.5% and U.K.-based Rolls Royce (LON:RR) fell 1.8%, while smaller suppliers such as Senior PLC (LON:SNR) fell 8.5%.
4. FedEx-Amazon spat to liven up courier's earnings
What a day for FedEx to be reporting earnings. It emerged on Monday that Amazon.com (NASDAQ:AMZN) has banned third-party sellers from using the logistics company’s ground services for deliveries to Prime customers because, it claims, it is too slow.
The move shows Jeff Bezos’ company forcing the pace of its separation from FedEx (NYSE:FDX), as it builds up its own logistics operations. The news will attach more significance to management’s outlook for 2020.
FedEx is due to report its fiscal second-quarter earnings after the bell. Analysts expect earnings per share of $2.82, down some 30% from a year earlier, on a marginal decline in revenue to $17.6 billion.
5. Unilever's growth warning
Consumer giant Unilever (LON:ULVR), the owner of Ben & Jerry’s ice cream and Dove soap, said it will miss its sales growth target for this year, due to the economic slowdown in India, one of its largest markets, and to the failure of sales to rebound as hoped in North America.
The Anglo-Dutch company said it would also miss its medium-term target of 3%-5% underlying sales growth in the first half of next year, before returning to target in the second half. The news, which reflect India’s sharpest economic slowdown in six years, raises the pressure on CEO Alan Jope, who was expected to close the valuation gap with arch-rival Nestle (SIX:NESN) when he took over.
1. Boeing's board may decide to halt 737 MAX production
Boeing (NYSE:BA) may cut or even halt production of its 737 MAX in response to ongoing difficulties in getting the plane certified as safe to fly, according to various reports. The company’s board may take a decision as soon as Monday, having already convened to discuss the matter at the weekend.
The board meeting, first reported by The Wall Street Journal, comes only days after U.S. regulators warned Congress that Boeing (NYSE:BA) had been raising unrealistic expectations about when the aircraft would be cleared to fly, and that they felt Boeing was trying to pressure them into taking quicker action than they felt was prudent.
The 737 MAX grounding has already cost Boeing (NYSE:BA) $3.6 in one-off charges and a further $6.1 billion in provisions for compensating customers.
2. Bottoming out in China, gloom in Europe
Economic data out of China overnight strengthened impressions that the country’s economy is bottoming out. Industrial production growth accelerated to 6.2% in November, above the 5.0% expected and pulling further away from the 17-year low it hit in August.
Retail sales growth also picked up from 7.2% in October to 8.0%, while fixed asset investment growth stayed unchanged at 5.2%.
By contrast, flash purchasing manager index data out of Europe were weaker than expected, with gauges for manufacturing activity in Germany, France and the U.K. all falling. Services were slightly stronger than expected, but the 50.6 composite PMI for the euro zone suggests that its gross domestic product is still growing at its slowest pace in six years.
3. Stocks to open higher
U.S. stocks are set to open higher after Friday’s phase-1 trade truce with China removed another tail-risk for stocks going into year-end, hot on the heels of the Federal Reserve’s announcement of extra liquidity injections to prevent the repo market malfunctioning as it did at the end of 2018.
By 6:30 AM ET (1130 GMT), Dow futures were up 52 points, or 0.2%, while S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 0.4%. Dow futures were lagging in part due to the heavy weighting of Boeing (NYSE:BA) in the index.
Overnight, Asian stocks had stayed more or less flat, but Europe’s markets got off to a flying start, with the U.K. FTSE 100 index rising as much as 2% before paring gains.
With no major earnings due, the market will be free to focus on economic data, with the New York Empire State manufacturing index due at 8:30 AM ET and the IHS Markit PMI at 9:45 AM. The NAHB Housing Market Index is then due at 10 AM
4. DuPont's nutrition business goes to IFF in $26 billion deal
DuPont (NYSE:DD) de Nemours said it will combine its nutrition science business – which accounts for just over a quarter of its revenue – with International Flavors & Fragrances (NYSE:IFF) in a deal that values the division at $26 billion.
The transaction is the latest act in the saga of dealmaking that started with the merger of Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD), with a view to turning the two conglomerates into a string of more specialized and profitable sector-specific companies. The new IFF will be a big supplier of soy proteins, probiotics and other ingredients, including those with applications in the fast-growing space of plant-based meat alternatives.
DuPont (NYSE:DD) shareholders will receive shares equal to 55.4% of the combined company, while IFF’s shareholders get the other 44.6%. DuPont also will get a $7.3 billion cash payment.
Ireland-based Kerry Group (OTC:KRYAY), which had vied with IFF for the DuPont (NYSE:DD) unit, fell 3.5% in London in early trading Monday.
5. China warns Germany over possible Huawei ban
Having secured its flank against the U.S., China took more assertive line against Europe on trade issues.
Reports cited the Chinese ambassador to Berlin as saying that there would be “consequences” if Germany moved to exclude Huawei from the country’s 5G networks. That risk appears to be growing after lawmakers drafted a bill last week that aims to do just that. Chancellor Angela Merkel has so far steered clear of risking a confrontation with Germany’s largest trade partner over the issue, despite warnings by her top security officials.
The decision by Spain-based Telefonica (MC:TEF) to pick Huawei and Nokia (HE:NOKIA) together to build its 5G network in Germany appears to have galvanized resistance to the Chinese giant.
Elsewhere over the weekend, Chinese television pulled an English soccer game between Arsenal and Manchester City after Arsenal’s German-Turkish star Mesut Ozil criticised Chinese human rights violations in the largely Muslim province of Xinjiang. For Arsenal fans in China, the decision was a blessing in disguise, as the fallen giants of English soccer slumped to another dismal 0-3 defeat.
1. Trade deal rollercoaster ride to continue
China said Sunday it has suspended additional tariffs on some U.S. goods that were meant to be implemented on Dec. 15 after the world's two largest economies agreed a "phase one" trade deal on Friday.
The deal, rumors and leaks over which have whipsawed global markets for months, reduces some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of American farm products and other goods. But neither side has offered specific details on the amount of U.S. agricultural goods Beijing had agreed to buy.
And while U.S President Donald Trump announced that "phase two" trade talks would start immediately, Beijing made it clear that moving to the next stage of the trade negotiations would depend on implementing phase one first.
2. Brexit fog to lift?
The sweeping election victory by Prime Minister Boris Johnson’s Conservative Party has paved the way for Britain to leave the EU on Jan. 31. That process could begin after the state opening of the parliament with the Queen’s Speech on Thursday. The Queen's Speech is used to detail all the bills the government plans to enact over the coming year.
British Cabinet Office Minister Michael Gove said on Sunday that the top priority of the government is to leave the European Union on Jan. 31 and secure a new trade deal with the EU by the end of next year.
Meanwhile, on Thursday the BoE will have its first chance to give its view on the post-election landscape. Investors will be watching out for any shifts in its views on inflation, the UK economy and the interest rate outlook for 2020.
3. Fed speakers
Investors will be looking ahead to remarks from several Fed officials in the coming days after the U.S. central bank voted unanimously to hold rates steady last week and signaled that they can remain on hold through 2020. Fed Chair Jerome Powell said the banks view of the economy remains favorable.
Dallas Fed President Robert Kaplan, New York Fed President John Williams and Eric Rosengren of the Boston Fed are all due to speak on Tuesday, while Chicago Fed President Charles Evans is scheduled to speak a day later.
4. U.S. Economic data
The U.S. economic calendar includes updates on industrial production, housing, consumer sentiment, personal income and spending and another look at third quarter GDP.
“The narrative is likely to continue to be one of manufacturing in recession as a result of the uncertainty caused by trade wars in combination with weak global demand and a strong dollar, although the return to work of 50,000 or so General Motors workers after the conclusion of their recent strike action will lead to a rebound in auto manufacturing output,” analysts at ING said.
5. Can Germany avoid Q4 recession?
First clues as to whether the euro zone’s largest economy Germany can avoid a fourth quarter recession emerge on Monday when advance PMI readings for November are released.
The economic activity surveys, a key barometer of economic health, come after Citi's economic surprise index showed euro zone economic data beating consensus expectations at the fastest pace since February 2018. The latest surprise was a 1.2% rise in German exports in October, defying forecasts of a contraction.
Hopes are high that exports and private consumption, which helped Germany skirt recession, will hold up. Last month's PMI data showed manufacturing remained in deep contraction across the bloc.
--Reuters contributed to this report
1. Radio silence from Beijing
China kept an awkward silence as it digested the reported offer by the U.S. to roll back some tariffs and cancel those due to come into force at the weekend, in return for guaranteed annual purchases of U.S. farm goods.
“Chinese authorities and official media so far haven’t given any information on China and the U.S. are close to a deal,” Hu Xijin, editor of the English-language Chinese publication Global Times, said via Twitter. “As the U.S. side released optimistic information through various channels, the Chinese side has basically kept silent. This is a delicate situation.”
Analysts argue that the offer by the White House may be perceived as a trap, saying that Beijing will resist being drawn into an agreement where its compliance can be easily and reliably measured.
2. U.K. assets surge on Conservative triumph
U.K. assets surged after an emphatic victory for Boris Johnson’s Conservatives lifted the political uncertainty over Brexit and banished the threat of a radical left-wing government.
The pound consolidated against the dollar and euro after its biggest one-day gain in over two years. U.K. stocks also rose sharply, with homebuilders, banks, utilities and consumer stocks all figuring prominently.
Yields on U.K. government bonds hit their highest since the spring as risk appetite returned and the prospect of a big boost to public spending next year militated against any further interest rate cuts by the Bank of England.
3. Stocks set to open higher; retail sales data eyed
U.S. stocks are set to open higher on Friday, on a combination of trade hopes, greater clarity over Brexit in the wake of the U.K. election – and the commitment of the Federal Reserve to flood the market with liquidity over the year-end to ensure that last year’s bout of volatility isn’t repeated.
By 6:35 AM ET (1135 GMT), Dow futures were indicated up 141 points, or 0.5%, while the S&P 500 futures contract was up 0.4% and the Nasdaq 100 futures contract was up 0.5%.
The day's earnings and data calendars are light, with the highlight being retail sales data for November due at 8:30 AM ET (1330 GMT).
4. House committee to vote on articles of impeachment
The House Judiciary Committee will likely vote on two articles of impeachment, seeking to remove President Donald Trump for abuse of office and for obstructing the work of Congress.
The vote is shaping up to proceed on partisan lines, with GOP representatives still refusing to accept allegations that Trump pressured Ukraine, a U.S. ally, into investigating the son of Joe Biden in order to help his own re-election campaign. Trump allegedly withheld military aid approved by Congress for Ukraine, hoping to extract an announcement from President Volodymyr Zelensky that Hunter Biden was being investigated for corruption.
If the vote passes the full House, Trump will be tried in the GOP-controlled Senate.
“There’s no chance the president is going to be removed from office,” Senate Majority Leader Mitch McConnell told Fox News on Thursday night.
5. Broadcom (NASDAQ:AVGO) predicts bounce-back
Broadcom (NASDAQ:AVGO) published weaker-than-expected figures for the final quarter of its year ending Nov. 3 but said revenue growth and profit would bounce back in the coming year.
The company has been hit harder than most in the sector by the protracted U.S. export ban on some items to Chinese telecom giant Huawei.
Elsewhere after the bell on Thursday, Oracle (NYSE:ORCL) said it would leave Safra Catz as sole CEO after the departure of Mark Hurd. Its latest quarterly profit beat expectations but revenue fell short.
1. Trump due to meet with trade advisors
President Donald Trump is due to meet with his top trade advisors ahead of Sunday’s deadline for the next round of U.S. import tariffs on Chinese goods, according to various reports.
The White House has not confirmed the meeting, but the reports suggest Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and White House advisors Larry Kudlow and Peter Navarro will be present.
The administration previously announced its intention to levy 15% tariffs on Chinese imports worth an estimated $160 billion annually. With no sign of a ‘phase-1’ deal with China being imminent, the meeting effectively boils down to a decision whether or not to delay the proposed measures. CNBC reported that officials had circulated talking points playing down the impact of the tariffs, which will cover many popular consumer goods.
2. No change seen at Lagarde's first ECB meeting, but Turkey, Brazil cut rates
Christine Lagarde will chair her first policy-making meeting of the European Central Bank’s governing council, the results of which will be published at 7:45 AM ET (1245 GMT) as usual.
The focus, however, will be on Lagarde’s first press conference at 8:30 AM ET (1330 GMT), in as much as nobody expects any change in policy so soon after Mario Draghi’s farewell package of easing measures in September.
Lagarde is expected to announce the start of a thorough review into how the ECB conducts policy, something that is likely to cover how it defines its inflation target, the policy tools it uses to pursue it and the way it communicates its decisions. The last of those may assume particular importance as Lagarde struggles to forge consensus on a bank bitterly divided over the resumption of quantitative easing.
Elsewhere, the Swiss National Bank left its key rate at -0.75% while Turkey’s cut its by 200 basis points, keeping the global trend toward easier monetary policy intact. Brazil’s central bank had also cut its key rate on Wednesday and, surprisingly, left the door open for further easing.
3. Stocks set to open slightly higher
U.S. stock markets are set to open modestly higher, building on equally modest gains after Fed Chairman Jerome Powell’s press conference on Wednesday.
By 6:20 AM ET (1220 GMT), Dow futures were up 22 points or 0.1%, while S&P 500 Futures and Nasdaq 100 futures were also up 0.1%. The yield on the 10-Year U.S. Treasury bond edged up to 1.80%.
Trading is likely to stay dependent on noise from Washington and Beijing about the looming tariff decision.
4. The Brexit election is here
The British head to the polls for a general election, and are expected to return the Conservative Party to power with a majority – according to spread-betting companies – of some 40 seats. That is at the lower end of Prime Minister Boris Johnson’s comfort zone.
The most recent polls have suggested the Tories hold a lead of 10 points over the left-wing Labour Party at a national level, but the U.K.’s ‘first-past-the-post’ electoral system means that the final result will depend on how a few dozen marginal constituencies (swing districts) vote.
Any majority, however small, will allow Johnson to pass his EU Withdrawal Bill immediately, formalizing the U.K.’s departure from the bloc. However, the smaller his majority, the easier it will be for hardline Brexiteers to derail subsequent negotiations on the U.K.’s trading relationship with the EU, which will have far-reaching long-term consequences for the U.K. economy and its markets.
5. IEA Warns of Oil Glut in H1 2020
The global oil market will stay oversupplied in the first half of next year despite the extra production cuts announced last week by the OPEC+ group, according to the International Energy Agency’s monthly report.
The Paris-based think-tank said that global oil inventories will still swell by 700,000 barrels a day even if all the countries signing up to the cuts comply fully with their commitments (something that hasn’t happened this year).
U.S. crude prices were still higher, supported by the Federal Reserve's perceived dovish outlook for the next year on Wednesday.
Elsewhere, Saudi Crown Prince Mohammed bin Salman finally achieved his wish as domestic funds pushed Saudi Aramco's (SE:2222) valuation up another 10% on its second day of trading, finally reaching the $2 trillion he always thought it was worth. In unrelated developments, Harold Hamm, the leading light of the U.S. shale industry, said he’ll step down as CEO of Continental Resources (NYSE:CLR)
1. Fed to stand pat
The Federal Reserve’s two-day policy-meeting winds up at lunchtime, with the Fed’s statement due at 2 PM ET (1700 GMT) and Chairman Jerome Powell’s press conference set to start half an hour later.
No change in interest rates is expected, so the market’s focus will be on Powell’s guidance, which is unlikely to have changed much from October, when he indicated that policy will remain on hold barring any marked downturn in the economy. Nothing of the sort was in evidence in last week’s labor market report, which showed the unemployment rate dipping to 3.5% and average hourly earnings ticking up.
Consumer inflation data for November, which are due for release at 8:30 AM ET, are unlikely to have any impact on the Fed’s decision-making, at least today.
2. A Tale of Two Oil Majors
Saudi Aramco (SE:2222) stock soared 10% on its market debut, confirming its status as the world’s most valuable company with a valuation of $1.88 trillion by the time it was suspended on the Tadawul exchange in Riyadh.
Reports point to aggressive buying in the secondary market by local individuals and funds, aimed at validating Crown Prince Mohammed bin Salman’s aspirations for a $2 trillion valuation. The company pulled planned international listings after institutional investors across the world baulked at the Prince’s demands.
For a more reliable indicator of the market outlook for oil and gas companies, investors may be better advised to look at Chevron's (NYSE:CVX) $10 billion write-down of its assets after the close on Tuesday. Most of that was caused by its Marcellus and Utica shale gas assets, which have been hit by a sustained glut in production in the region. It also wrote down the value of its Kitimat LNG project in Canada and its Big Foot oil project in the Gulf of Mexico.
3. Stocks set for mixed open on confused trade backdrop
U.S. stock markets are set to open mixed against a backdrop of conflicting remarks about the likelihood of more U.S. import tariffs coming into effect at the weekend. Various reports suggested that the U.S. is considering delaying the move, which would avert the most market-negative scenario in the short term but still leave the possibility hanging over markets in the longer term.
However, White House economic advisor Lawrence Kudlow told Bloomberg on Tuesday that the tariff increase is “still on the table”.
By 6:20 AM ET (1120 GMT), Dow futures were down 50 points, or 0.2%, while S&P 500 Futures were down 0.1% and Nasdaq 100 futures were just in green territory. Trading is likely to stay quiet until the Fed’s statement and press conference.
Yogawear maker Lululemon Athletica is due to release earnings for the three months to October, in an otherwise quiet day for corporate reports.
4. Sterling slips as final polls show a tighter race
The British pound recovered after falling nearly a cent against the dollar as a final opinion poll suggested that the Conservative Party’s lead had narrowed substantially in the last two weeks of the campaign.
YouGov’s second Multilevel Regression Poll, which uses broader samples and deeper analytics than most other polls, suggested that the Tories were still on course to win a majority at tomorrow’s general election, albeit the base case estimate of a 28-seat majority means that another ‘hung’ parliament with no overall majority is now within the margin of error.
Sterling had briefly broken through $1.32 for the first time since March immediately before the poll was published. It dropped as far as $1.3112 in response, before recovering to $1.3152 by 6:09 AM ET
5. EU to present 'Green New Deal'
The European Union will set out plans to make Europe climate-neutral by 2050, an objective that is likely to be cemented in law over the five-year term of the new Commission under Ursula von der Leyen.
Various elements of the package are likely to put pressure on European industries – notably utilities and transport-related companies - to accelerate their efforts to cut or neutralize carbon emissions, while the Commission will also confirm plans to introduce a “carbon border tax” that will penalize imports produced under laxer environmental standards.
As such, the measures carry the seed of future trade disputes, given the U.S.’s decision to withdraw from the Paris Climate Accord and the continuing reliance of China on coal-fired power.
1. Stocks set for weak opening
U.S. stock markets are set to open lower again as fears grow that there will be no trade deal between the U.S. and China to stop the latest round of U.S. tariffs coming into force on Sunday.
By 6:30 AM ET (1130 GMT), Dow futures were down 149 points or 0.5%, while S&P 500 futures were also down 0.5% and Nasdaq 100 futures were down 0.6%.
Overnight, Asian markets traded mixed, with most trending lower, while European markets – always highly exposed to trade dynamics – fell more sharply. The Euro Stoxx 50 lost 0.8% while the German DAX was down 1.2%.
Autozone leads a minimal earnings roster for the day.
2. Democrats set to announce Articles of Impeachment
The House of Representatives is expected to file at least two articles of impeachment in its effort to remove President Donald Trump from office, according to various reports.
The articles, one alleging abuse of office and the other alleging obstruction of Congress, are set to be announced at a news conference at 9 AM ET (1400 GMT) in Washington.
3. U.S. swipes at Chinese transportation sector
With radio silence on the trade front as the clock ticks down to the Dec. 15 deadline on more U.S. tariffs, the U.S. and Chinese governments continue to snipe at each other through sector-specific measures aimed at cutting each other out of their respective markets.
The U.S. is drafting a bill that would stop federal agencies buying railcars and buses made by Chinese companies, two of which have invested heavily in U.S. production facilities in recent year, according to The Wall Street Journal. The National Defense Authorization Act would exclude railway giant CRRC and electric vehicle maker BYD from federal contracts.
The move follows a Chinese order at the weekend to remove all U.S. computers and software from Chinese government offices and agencies.
4. Japanese, Chinese, German data point to global weakness in Q4
The world economy looks in dicey shape going into the fourth quarter, with data from Japan and China overnight both painting a gloomy picture. Producer price inflation in China ticked up in November but was still -1.4% on the year. Consumer prices looked close to peaking after a surge in pork prices abated.
Machine tool orders in Japan fell at their fastest rate since the 2009 recession in October, down 37.9% on the year. The data, follow a similar, if gentler, drop in German factory orders for October last week, and point to sustained weakness in global business investment, given that both economies are heavily exposed to trade in capital goods.
Separately, the German Mechanical Engineering Association said its members don’t expect production to pick up before the second half of next year. The German ZEW survey, by contrast, painted a more optimistic picture, its economic sentiment index hit the highest level since February 2018.
5. U.S. data calendar headed by API oil supplies
The U.S. data calendar is light, with only nonfarm productivity data and unit labor costs due at 8:30 AM and the Redbook retail survey due 25 minutes later. The NFIB small business optimism index, released earlier, rose to a four-month high of 104.7, beating expectations.
Also of note, in light of the OPEC+ decision to cut supply more deeply over the next three months, are American Petroleum Institute data on U.S. oil supplies, due at 4:30 PM ET. Traders expect tomorrow's government data to show a drop of 3.05 million barrels in crude stocks.
1. NAFTA replacement in sight
The U.S. is closing in on a trade deal with – wait for it, no, not China – Mexico and Canada, according to reports over the weekend.
The U.S.-Mexico-Canada Agreement, or USMCA, is closer to completion now that House Democrats and the Trump administration have smoothed over most of their remaining differences, according to The Wall Street Journal and others.
After a bruising year of trade conflicts with China, Europe and, most recently, Brazil and Argentina, progress on USMCA would be welcome. The new agreement, which is supposed to supersede NAFTA, will likely include tighter monitoring of labor standards in Mexico, the reports suggested.
2. House close to sealing articles of impeachment
However, it’s not all good news for President Donald Trump. The House Judiciary Committee is set to decide as early as today on how to frame articles of impeachment, according to Chairman Jerrold Nadler.
The Committee will hear from its own and from another committee’s lawyers Monday about the constitutional grounds for impeachment and the evidence gathered against Trump. It isn’t clear whether the articles of impeachment will focus solely on the allegations of abuse of office with regard to withholding Congressionally-approved military aid for Ukraine, or will be based on a broader slate of charges.
The likelihood of Trump being removed is still low, given that it would need a two-thirds vote in favor from a chamber that is still controlled by the Republican Party.
3. Stocks subdued ahead of central bank meetings, trade deadline
U.S. stock markets are set to start the week in subdued mood, all three main indexes edging down less than 0.1% as of 6:40 AM ET (1140 GMT).
Overnight, Asian and European stocks had also stayed in relatively narrow ranges.
Trading is set to stay ultra-sensitive to trade-related headlines, given that it’s now less than a week before the latest round of U.S. tariffs on imports from China kicks in.
To quieten activity further, there’s the prospect of policy meetings at the Federal Reserve and the European Central Bank in the middle of the week. While neither central bank is expected to touch its official interest rates, there will be the usual close scrutiny of the language used by both Jerome Powell and Christine Lagarde – all the more so in Lagarde’s case, since this will be her first press conference as president.
On the earnings front, online pet food retailer Chewy is due to report after the close along with Stitch Fix and Versum Materials.
4. Crude settles into higher range post OPEC+
Crude oil prices have seemingly settled into a higher range after Friday’s meeting of the OPEC+ group produced a more significant cut in output than had been expected – at least for the next three months.
By 6:40 AM ET, U.S. crude futures were down 1.0% at $58.63 a barrel, while international benchmark Brent was down 0.9% at $63.87 a barrel.
Saudi Arabia decided to cut its own output by more than the agreed amount, meaning that the notional amount of capacity being held back from world markets will rise to 2.1 million barrels a day from 1.7 million currently. Analysts warn that the actual extent of restraint may not match that, but Saudi Arabia will remain under pressure in the near term to keep the market orderly, given that the alternative would risk a big disappointment for all the investors in the Saudi Aramco IPO.
On Friday, data from drilling company Baker Hughes showed that the number of active oil rigs in the U.S. fell to its lowest since March 2017, a reflection that shale producers are finding it increasingly tough to sustain production with only marginal cash flow at current prices.
5. Pound rises as Johnson enters home straight
The British pound hit its highest level against the dollar in nearly eight months as the Conservative Party defended a big lead in opinion polls at the start of the final week of the U.K.’s general election campaign.
While the vagaries of the British electoral system mean that even a 10-point lead in the polls may not translate automatically into a majority in the House of Commons, recent polls have suggested that the Tories have made significant inroads into traditionally Labour areas in northern England which voted overwhelmingly to leave the European Union in 2016.
An optimal result for the foreign exchange and local stock markets would be a big Tory majority, not only because it would ensure the U.K. leaves the EU without further delay, but also because it would allow Johnson to conduct future negotiations on an EU trade agreement secure against pressure from the more extreme Brexiteers in his party. It would also likely force a rethink of the extreme-left policy platform adopted by the Labour Party under Jeremy Corbyn
1. Fed decision
The Fed is expected to hold steady at the conclusion of its meeting on Wednesday after cutting rates three times this year to shield the U.S. economy from a global slowdown. Friday's far stronger-than-expected U.S. jobs report reinforced expectations that policymakers will remain on hold as they monitor the economy.
After the last rate cut, in October, Fed Chair Jerome Powell said both the economy and policy were in a "good place" and indicated that policymakers saw little need to cut rates further.
"I think they are feeling really good right now that they’ve decided to put this thing on pause,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.
Investors will get the latest consumer price inflation figures ahead of the Fed meeting, which are expected to show inflation running at 2%, while retail sales numbers on Friday are forecast to show growth of 0.4%.
2. ECB decision
Christine Lagarde will hold her first meeting and news conference as ECB president on Thursday. Markets are not expecting any changes to monetary policy after the ECB announced fresh stimulus in September and following recent signs that the euro zone economy is bottoming out.
Yet Lagarde's every word will be studied for her thoughts on the monetary policy outlook, the economy and an upcoming strategy review. And after eight years of the straight-talking Mario Draghi, expect the new ECB chief's communication style to also fall under scrutiny.
3. Trade wrangling
Beijing and Washington are trying to reach agreement on a 'phase one' trade deal that would cool a 17-month trade war that has roiled financial markets and weighed on global economic growth, but they continue to wrangle over key details.
There is just a week to go until the Dec. 15 deadline for the U.S. to impose tariffs on the remaining $156 billion in Chinese imports and financial markets have been whipsawed by shifts in rhetoric.
U.S. President Donald Trump said on Thursday trade talks with China are "moving right along," striking an upbeat tone even as Chinese officials reiterated that existing tariffs must come off as part of an interim deal. Earlier in the week, though, Trump rattled global markets when he said a deal might have to wait until after the 2020 presidential election.
Data on Sunday showed that China's exports declined for the fourth consecutive month in November, but growth in imports may be a sign that Beijing's stimulus measures are helping to stoke demand.
4. U.K. election
More than three years after the U.K. narrowly voted to leave the European Union, the Dec. 12 general election will effectively offer them another vote on how they want Brexit to proceed and if they still think it should go ahead.
Opinion polls showing the Conservative Party with a big lead have fueled a rally in the British pound amid the view that Conservatives will quickly implement Brexit and end the uncertainty that's weighed on the economy since 2016.
But some risks remain. First, the gap between the Conservatives and Labor doesn’t need to narrow much to deliver another hung Parliament. Second, if a Conservative win is already priced in, traders may be tempted to take profits, pushing sterling lower.
After the election, the focus will shift to the 11-month window for Britain to sign trade deals with the EU, a prospect which is likely to keep investors on edge.
5. Market volatility
Stocks pulled back from record highs to start December, undermined by comments from Trump suggesting a trade deal with China might have to wait until after the 2020 election. But the market rebounded at the end of the week on Friday's strong U.S. jobs and a change in tone from Trump.
Wall Street could see more volatility ahead of the Dec. 15 tariff deadline. At the start of the week, investors said equity prices were factoring in that those tariffs would be delayed if not canceled, but subsequent tough talk from Trump officials has shaken those expectations somewhat.
"Until we get some finality on this, the day-to-day is going to move on headlines that suggest progress or lack thereof,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta.
--Reuters contributed to this report
1. Payrolls Day
The Commerce Department will release its monthly survey of the U.S. labor market, the most closely-watched update on the health of the U.S. economy, at 8:30 AM (1330 GMT). The headline nonfarm payrolls number is expected to have picked up to 186,000 from a four-month low of 128,000 in October, although the monthly fluctuation is somewhat distorted by the end of the strike at General Motors (NYSE:GM).
In a still-tight labor market, arguably the more important number will be average hourly earnings growth, which have dipped slightly to an annual rate of 3.0% for the last two months. They’re expected to stay at that rate. Likewise, average weekly hours worked are expected to stay at 34.0.
The numbers come after a much weaker-than-expected report on private-sector payrolls from ADP (NASDAQ:ADP) earlier in the week.
2. OPEC+ to sign off on a sort of production cut
The Organization of Petroleum Exporting Countries said after a marathon session of haggling between its members that it wants to take another 500,000 barrels a day of production off world markets through March 2020. The cut is largely symbolic because OPEC is already producing less than the agreed ceiling under the existing deal on output restraint.
Under the proposal, OPEC countries would cut their output by 395,000 barrels a day, while its allies led by Russia would cut another 105,000 barrels a day. There is, however, a big loophole: Russia’s production of gas condensate, estimated at 700,000 barrels a day next year, won’t be included in the calculations. Saudi Arabia, meanwhile, is already producing well below its output ceiling, meaning that the actual outcome for markets will depend on the behavior of countries like Iraq and Nigeria, who have repeatedly breached their quotas in recent months.
The measures, which need to be ratified by a meeting that is still in progress, are intended to stop a fresh glut forming on world markets, but analysts are skeptical that what’s been announced will be enough. Crude oil traders, who have pushed prices nearly 4% higher this week in anticipation of deeper output cuts, have decided to hold fire until they see more details.
(CORRECTION: An initial version of this article incorrectly reported the timeframe for the cuts)
3. Stocks set to open higher on Chinese tariff waiver
U.S. stock markets are set to open higher Friday, encouraged by a Chinese government decision to waive import tariffs on U.S. pork and soybeans. Beijing had imposed a 25% tariff on both in response to U.S. tariff increases earlier in the year.
By 6:25 AM ET (1125 GMT), Dow futures were up 73 points or 0.3%, while S&P 500 Futures were up 0.3% and Nasdaq 100 futures were up 0.4%.
Stocks to watch this morning include Zoom Video, which fell sharply in after-hours trading after its outlook failed to match Wall Street’s ambitious expectations. By contrast, Crowdstrike and DocuSign both popped higher after their earnings after the bell on Thursday.
4. The world's most valuable company
Saudi Aramco finally broke the record for the world’s largest-ever initial public offering, raising the equivalent of $25.6 billion through the sale of a 1.5% stake.
The deal, which was priced at the top end of the bookbuilding range of 30 to 32 Saudi riyals, valued the company at some $1.7 trillion. While that makes Aramco officially the world’s most valuable company, it’s some 15% less than the valuation the kingdom had initially hoped for.
The sale ultimately reflects the seller’s failure to attract institutional buyers from developed capital markets due to its refusal to compromise on core concerns around governance. Trading on the Saudi exchange is due to begin next week.
5. Uber's report details extent of safety flaws
Uber (NYSE:UBER) said it had fielded nearly 6,000 reports of sexual abuse by its drivers in the U.S. in the past two years, confirming one of the most serious fears about its governance.
The report, which was commissioned by the company itself in the wake of founder Travis Kalanick’s departure as CEO, comes less than two weeks after the city of London said it would suspend the company’s license to operate because of repeated failures in monitoring drivers.
There were 515 incidents of rape or attempted rape in 2018 alone - almost 10 a week - the report said.
The numbers are still small in relation to the 2.3 billion rides booked by Uber (NYSE:UBER) in the two years under examination. Uber calculated that 99.9% of its trips are safe.
1. Shinzo Abe launches big fiscal stimulus package
Japan launched its biggest fiscal stimulus package in three years hoping to lifting an economy that has been hit by the Chinese slowdown, a separate trade war with South Korea, a rise in the domestic consumption tax and, not least, typhoons in the last 12 months.
The overall package of measures, at 13.2 trillion yen ($121 billion) was larger than expected, and is around 1.9% of expected gross domestic product over the 15 months through which it will be spread.
The news pushed the yen slightly lower against the dollar to 108.96 by 6:15 AM ET (1115 GMT).
2. OPEC warms up for the big one
The Organization of Petroleum Exporting Countries meets in Vienna today to hammer out a position on whether it should cut its output further next year to support world prices. The meeting is a prelude to another one with non-OPEC producers (most importantly, Russia), tomorrow.
Friday’s meeting will determine the fate of the so-called OPEC+ pact which is due to expire at the end of March. Bilateral meetings between ministers have so far yielded no real sense of the direction of travel. While some – especially Iraq – have talked about possibly deepening the existing production cuts by an additional 400,000 barrels a day, no-one has formally backed the idea in public.
U.S. crude futures were up 0.1% at $58.52, while the international benchmark Brent was up 0.5% at $63.33 a barrel.
3. Stocks set to open higher
U.S. stocks were set to open higher, with liquidity issues again trumping fears of a continued trade war.
By 6:15 AM ET (1115 GMT), Dow futures were up 113 points, or 0.4%, S&P 500 Futures were also up 0.4% and Nasdaq 100 futures were up a shade more, 0.5%. The Japanese Nikkei had also risen 0.5% overnight on the back of Abe's stimulus package.
There’s a broad range of earnings reports from the retail sector due, with Dollar General, Kroger, Tiffany & Co (NYSE:TIF) and cosmetics group Ulta Beauty all set to report. Slack may see something of a bounce after rising 1.9% in after-hours trading on Wednesday on the back of a stronger-than-expected outlook.
Saudi Arabia is also due to close the books on the initial public offering of Saudi Aramco.
4. Challenger Job Cuts, initial jobless claims
The monthly Challenger Job Cuts survey and weekly initial jobless claims take pride of place in Thursday’s data calendar, a day ahead of the definitive official labor market report for November.
The first signs, which came out on Wednesday, were not good: ADP’s assessment of only 67,000 private-sector jobs created last month was the weakest in six months, although the hiring component of the Institute for Supply Management’s non-manufacturing survey was one of the more robust parts of a weaker-than-expected report.
There will also be data for factory orders in October at 10 AM ET (1500 GMT). They’ll provide an interesting counterpoint to another set of disappointing factory orders out of Germany, which pointed to a weak fourth quarter with a 0.4% drop on the month that took the year-on-year decline to 5.5%.
5. Chinese brinkmanship
There’s an increasing air of brinkmanship in talks between the U.S. and China over trade, with Beijing repeating on Thursday that the U.S. needs to cut import tariffs as part of a phase-1 deal with China.
“The Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly,” Reuters reported Foreign Ministry spokesman Gao Feng as saying, adding that the two sides were maintaining close communication, despite Chinese annoyance at the U.S. forcing non-trade elements such as human rights and Hong Kong into the picture.
There is now only 10 days before a new round of U.S. tariffs kicks in, covering about $156 billion of Chinese imports annually.
1. Trade cut-and-thrust gets cuttier and thrustier
A day after President Donald Trump sent stock markets spinning and haven assets soaring by saying there may be no trade deal with China until after next year’s election, the damage limitation exercise began, with both The Wall Street Journal and Bloomberg citing ‘sources familiar with the matter’ as talking up the likelihood of a deal.
But those who believe actions speak louder than (unattributed) words will point to the fact that the House of Representatives on Tuesday passed another bill raising scrutiny of China’s domestic human rights record, the Uighur Act of 2019. As with a similar bill on Hong Kong, the Uighur Act embeds an intractable political issue in the trade talks process.
Beijing reacted angrily to the bill, and China’s foreign ministry went so far as to downplay the Bloomberg story, insisting that “equality” must be at the heart of a ‘phase-1’ deal – its way of saying it wants all tariffs imposed since 2018 rescinded. That directly contradicted Trump’s comments on Tuesday that phase-1 “cannot be an even deal.”
2. Google's founders step down
Google founders Sergey Brin and Larry Page said they will step down from executive roles at the online platform’s parent company Alphabet (NASDAQ:GOOGL), handing full control to CEO Sundar Pichai. They’ll still be on Alphabet’s board and will have effective control over company decisions, under Alphabet’s two-tier share structure.
The move comes as Google’s business faces increasingly intense regulatory scrutiny, not just for its market power and possible abuse thereof, but also for the corporate culture that the founders have presided over.
In a farewell email, the two reportedly said they would continue to be in regular contact with Pichai.
The company’s shares have risen 24% so far this year, and were little changed in after-hours trading on Tuesday.
3. Stocks set for a modest bounce
U.S. stock markets are on course to recoup a little less than half of their Tuesday losses when they open later, as the reassurances from western media get more resonance than the angrier tones coming out of Beijing.
By 6:15 AM ET, Dow futures were up 125 points or 0.5%, while S&P 500 futures were up 0.4% and Nasdaq 100 futures were up 0.6%.
Software companies Salesforce and Workday both beat expectations in their earnings reports after the closing bell on Tuesday but that didn’t stop either from falling in after-hours trading. Peloton (NASDAQ:PTON), too, will be under the spotlight after a negative reaction to an ad perceived as sexist sent the stock down over 9% on Tuesday. It’s still up by around one-third since listing in September.
4. ISM services survey, ADP's payrolls report due
After a weaker-than-expected manufacturing survey at the start of the week, the Institute of Supply Management releases its non-manufacturing purchasing manager index at 10 AM ET, quarter of an hour after IHS Markit releases its services PMI.
IHS Markit’s surveys from the rest of the world were a mixed bag overnight, with the Chinese PMI rising strongly while the euro zone PMI modestly beat expectations, but only by enough to keep the composite PMI reading stable at 50.6.
Before the PMIs, there will also be ADP’s monthly update on private payrolls at 8:15 AM ET, where job gains of 140,000 are expected for November, up from 125,000 in October.
Elsewhere, the Bank of Canada is expected to keep interest rates unchanged at its regular policy meeting.
5. Crude rebounds on API stocks, Iraq chatter
Crude oil prices have bounced somewhat better than stocks so far Wednesday, on fresh reports that Iraq, the country with the worst record on compliance with the OPEC+ output restraint deal, signalling that it expects pressure from Saudi Arabia for deeper supply cuts at meetings in Vienna over the next two days.
U.S. crude futures were up 1.6% from late Tuesday at $56.97 a barrel by 6:15 AM ET, while international benchmark Brent was up 1.7% at $61.88.
At 10:30 AM, the U.S. will release its official inventories data for last week. Tuesday’s report on U.S. oil supplies from the American Petroleum Institute suggested a sharper-than-expected drop in stocks.
1 Trump dangles trade deal delay
President Donald Trump raised the prospect of delaying a trade deal with China until after the 2020 election, rattling markets that have been happy to push ever higher on promises that a deal was just around the corner.
“In some ways, I like the idea of waiting until after the election for the China deal," Trump told reporters in London ahead of a summit of leaders from the NATO alliance. He added that China "want to make a deal now and we will see whether or not the deal is going to be right.”
Trump’s comments come less than two weeks before the next round of tariffs on Chinese imports is due to kick in. The new tariffs would affect a broad range of products, making it harder to cushion the impact of the policy on U.S. consumers. They also come one day after Trump announced new tariffs against steel and aluminum imports from Brazil and crisis-ridden Argentina, whom he accused of currency manipulation.
2. France to retaliate against Trump’s retaliation
The French government said it would retaliate against President Trump’s decision to impose tariffs of up to 100% on $2.4 billion of French goods, a measure that Trump styled on Monday as retaliation against France’s initiative to introduce a tax on digital services that affects mainly U.S. giants such as Facebook (NASDAQ:FB) and Amazon.com (NASDAQ:AMZN).
The U.S. Trade Representative’s office had also warned that other countries with digital taxes could also be in line for sanctions. They include Italy, Austria and Turkey, while the U.K. aims to introduce one from next year.
Finance Minister Bruno Le Maire said in a radio interview that the tariff plans are “unacceptable” and not worthy of an ally. On the subject of alliances – Trump said ahead of the NATO summit that French President Emmanuel Macron had been “disrespectful” in calling the alliance ‘brain-dead’ in a recent interview.
3. Stocks set to open lower
U.S. stock markets are set to extend Monday’s losses after heavy falls in Asia overnight which spilled over into European markets on Tuesday morning as Trump raised the possibility of not proceeding with the oft-promised ‘phase-1’ trade deal with China.
By 6:30 AM ET (1130 GMT), Dow futures were down 85 points or 0.3%, while S&P 500 futures were down 0.3% and Nasdaq 100 futures were down 0.4%.
Haven assets have outperformed as might be expected. The yield on the 10-year Treasury note fell five basis points to 1.79%, while gold futures rose to a two-week high of $1,476.65 a troy ounce.
4. Software updates due
Salesforce and Workday, two of the buzziest names in business software report after the closing bell Tuesday.
Salesforce’s earnings per share are expected to rise to 66c from 61c a year ago, while revenue is expected to grow to $4.45 billion from $3.39 billion.
Workday’s earnings are set to grow faster, albeit from a lower base, to 37c from 31c, on a 24% rise in revenue to $921 million.
5. Oil hit by tariff comments ahead of API data
Crude oil futures are battling to stay in positive territory after the latest outburst from the self-styled “Tariff Man” cast fresh doubt over the outlook for global demand next year, ahead of this week’s crucial meetings between OPEC and its allies.
By 6:30 AM ET, U.S. crude futures were up 0.2% at $56.06 a barrel, while the international benchmark Brent was up 0.1% at $60.95, both down over 1% from the highs they hit on Monday on reports of deeper output cuts from the cartel.
The meetings will put a sharper-than-usual spotlight on the American Petroleum Institute’s weekly update at 10:30 AM ET on U.S. oil supplies, which have registered some chunky stock builds in six of the last eight weeks. Estimates for the government data, due Wednesday, suggest the market expects a draw of 1.8 million barrels.