U.S. Stock Futures Advance as Trade Talks Set to Restart

(Bloomberg) -- U.S. stock-index futures ticked higher Friday as vice ministers from the U.S. and China prepared to hold trade talks and the U.S. House of Representatives passed legislation in an effort to end a government shutdown.

S&P 500 Index futures contracts expiring in March rose as much as 1.1 percent after the underlying gauge slumped 2.5 percent on Thursday. Futures contracts on the Dow Jones Industrial Average and Nasdaq 100 gained as much as 1.5 percent and 1.1 percent, respectively.

European equities followed through with the Stoxx Europe 600 Index gaining as much as 1%, led by trade sensitive shares such as miners and autos. Oil companies also rallied after a jump in crude prices. WTI crude rose as much as 1.7%. Banks joined the top performers of the gauge as risk sentiment improved.

U.S. Stock Futures Advance as Trade Talks Set to Restart

After a choppy start, futures contracts rose as positive sentiment emerged from China. The Caixin China December services and composite Purchasing Managers’ Indexes were more expansionary than expected and Beijing confirmed vice-minister level trade talks with the U.S. will begin Monday. Hong Kong’s Hang Seng Index and Shanghai’s benchmark both climbed as much as 2 percent.

“They get people all excited and it can lead to some warm statement,” said Chris Beauchamp, chief market analyst at IG Group Holdings Plc. “But we’ve been here before and it’s really is one of those cases where there’s hope for a dawn, and there’s no real development.” At the same time, there are also hopes that Federal Reserve chair Jerome Powell “might do something to sooth tensions across equity markets,” he added.

Adding to the positive mood, the U.S. House passed a bill to fund eight of nine government departments that have been shuttered for almost three weeks amid a protracted battle between President Donald Trump and Democrats over funding for a border wall. Market watchers are now awaiting the December non-farm payrolls report and Powell speaking in Atlanta.

The partial U.S. government shutdown is likely to push toward its third week after Trump remained steadfast in his demands for $5 billion for a wall or barrier in a surprise news conference flanked by members of a border patrol labor union. The White House threatened to veto any spending bill that would reopen the government and deny funds to the president as it can’t accept legislation that funds wasteful programs while ignoring “urgent border security needs.”

Read more on House Speaker Nancy Pelosi’s views on the border wall

Thursday’s drop in the S&P 500 Index only heightened investor angst seen last year as fears of a recession crept up. Washington’s political malaise is adding to frustration.

“The shutdown does weigh on the markets, even though I don’t get it. It’s not like the whole government shuts down,” said Bryce Doty, senior vice president at Sit Investment Associates. “It’s not necessarily about the government shutdown -- they’re quibbling over $5 billion when you have a deficit of over a trillion. Is this symbolic of what’s to come?”

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