Opening Bell: Stock Gains Continue Unabated Despite Trade Tariff Unknowns

• U.S. futures, European shares extend rally despite uncertainty over looming U.S. tariff round

• British pound gains for the 5th straight session on growing likelihood of Conservative party win

• WTI clings onto U.S. inventories-drop gains as OPEC meeting begins

Shares in Europe and futures on the S&P 500, Dow and NASDAQ 100 extended a rebound this morning that was favored by reports that the world’s two largest economies moved closer to a trade deal even amid hostile rhetoric.

The rebound came after a three-day panic selloff prompted by Donald Trump's remarks that a deal may only come after 2020. Meanwhile, however, the U.S. president's intentions regarding the next round of tariffs on Chinese goods, scheduled for Dec. 15, remain unclear.

It’s surprising that the market continues to react to all these reports when the trade environment hasn’t fundamentally changed: China still wants the U.S. to roll back all tariffs before the signature of a phase-one deal; the U.S. still wants China to commit to purchasing more U.S. agricultural products.

What has incrementally changed over the last two weeks is that both sides seem to be sending out political messages for their own respective audiences, as each ignores the other.

And even if both sides reluctantly swallow a phase-one deal, there seems to be little chance under current conditions that they'll reach a final agreement—and virtually zero chance they'll do so before the U.S.'s November 2020 presidential elections.

As to the question of whether U.S. President Donald Trump will press ahead with the Dec. 15 15% tariff round — which would hit $156 billion of Chinese consumer goods and which hold a key importance for the broader economy and the electorate — analysts are finding it challenging to make a judgement call. Trump’s plan seems to change by the day. Would he be willing to put the tariff tool down, even temporarily, ahead of what’s promising to be a tight election, again?

Technically, if the contract on the S&P 500 penetrates 3120, it will have completed a H&S bottom, suggesting an end to the preceding decline, at least in the very short term—but long enough to attempt another record high.

Get The App

Join the millions of people who stay on top of global financial markets with Investing.com.

Download Now

In Europe, household goods and healthcare shares pushed the STOXX 600 higher, as the rally eclipsed German equities' underperformance after the country’s factory orders figures disappointed.

h2 Global Financial Affairs/h2

Yields on 10-year Treasurys were flat after whipsawing between the biggest drop since August on Tuesday and an almost equal rebound, on the shifty trade outlook. Technically, rates are fluctuating as the short term and the long term struggle for dominance.

The British pound climbed for a fifth day against the greenback as expectations grew for a Conservative party’s victory in next week’s general election. Technically, the price completed a H&S continuation pattern.

WTI hit the resistance of its channel top but kept most gains of a rally after Energy Information Administration data showed U.S. crude inventories fell substantially more than expected. A key OPEC meeting kicks off in Vienna today, ahead of a summit with other non-OPEC oil producers tomorrow that will determine whether more supply cuts will be implemented.

h2 Up Ahead/h2

• Saudi Aramco’s initial public offering is scheduled to be priced today, with Riyadh looking to raise more than $25 billion.
• U.S. nonfarm payrolls, coming out on Friday, are expected to have risen by 190,000 in November.

h2 Market Moves/h2

Stocks

• France’s CAC 40 advanced 0.3%.
• The MSCI Asia Pacific Index climbed 0.5%.
• The MSCI Emerging Markets Index gained 0.3%.

Currencies

• The Dollar Index slid 0.1%.
• The British pound advanced 0.3% to $1.3144.
• The euro gained 0.1% to $1.1086.
• The Japanese yen was little changed at 108.90 per dollar.

Bonds

• The yield on 10-year Treasurys slipped less than one basis point to 1.77%.
• The yield on 2-year Treasurys gained less than one basis point to 1.58%.
• Germany’s 10-year yield climbed less than one basis point to -0.31%.
• New Zealand’s 10-year yield advanced six basis points to 1.469%.

Commodities

• West Texas Intermediate crude dropped 0.3% to $58.24 a barrel.
• Iron ore declined 0.2% to $86.69 per metric ton.
• Copper fell 0.1% to $5,881 per metric ton.
• Sugar advanced 1.6% to $0.1306 a pound.

Written By: Investing.com