U.S. Index Futures Extend Gains on Further Talks With China

(Bloomberg) -- U.S. stock-index futures rose as signs of progress keep emerging in the U.S.-China trade spat, while traders awaited the conclusion of the Federal Reserve’s policy meeting. European shares also climbed.

Contracts on the S&P 500 Index expiring in March climbed as much as 0.7 percent after the equity gauge closed little changed on Tuesday. Futures on the Nasdaq 100 Index and Dow Jones Industrial Average also gained as much as 0.7 percent each. The Stoxx Europe 600 Index added 0.2 percent, with autos and banks contributing the most to gains. Italian shares surged after reports saying the government reached a technical agreement with the European Commission on its budget plans.

Key Insights

  • The U.S. and China held vice-minister level trade talks by phone on Wednesday, China’s Ministry of Commerce said on its website, without giving details of the call. The two sides are planning to hold meetings in January to negotiate a broader truce in their trade war, according to Treasury Secretary Steven Mnuchin. They’ve held several phone discussions in recent weeks and were still in the process of planning further formal talks, he said.
  • Still, investors remain cautious a deal will be done by the March 1 deadline even as China’s openness to cutting tariffs on U.S. cars and buying soybeans is feeding optimism that the dispute will be resolved.
  • “The hiatus on trade helps as well, but I’m a bit more skeptical about how long lasting that is,” Ronald Temple, head of U.S. equity at Lazard Asset Management, told Bloomberg TV.
  • The Fed is likely to hike rates on Wednesday, even as President Donald Trump intensifies his attacks on the central bank.
  • Meantime, FedEx Corp. on Tuesday cut its profit forecast just three months after raising it amid a slowdown in global trade in recent months, with leading indicators pointing to an ongoing deceleration in the near term. The weaker outlook stoked concerns that the global economy is weakening.
  • FedEx’s warning follows Caterpillar Inc., a bellwether of global growth, that was punished by investors in October after repeating its warnings of rising costs due to higher steel prices and U.S. tariffs.

Get More

  • It’s Not That Bad: December in Asia Stocks Less Ugly Than U.S.
  • Scary S&P Charts Are Back After FedEx, Micron Awaken Macro Dread
  • FedEx Tumbles With Weaker Outlook Stoking Doubts on Global Trade
  • China and U.S. Planning for Trade Talks in January, Mnuchin Says
  • Charts Take Ominous Turn With S&P 500 February Floor Under Siege

Market Reaction

  • E-mini futures on the S&P 500 expiring in March rose 0.7 percent as of 8:29 a.m. in London; the underlying index has lost 7.8% so far in December.
  • Oil prices bounce back after Tuesday’s slump

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