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Stocks seen snapping back as Mnuchin says U.S. was ‘90% of the way there’ on China trade deal

U.S. stock-index futures attempted to claw back some of the previous day’s loss early Wednesday after a report from U.S. Treasury Secretary Steven Mnuchin suggested that a Sino-American trade deal wasn’t far from complete, supporting some modest appetite for buying on Wall Street.

Futures for the Dow Jones Industrial Average YMU19, +0.32% rose 76 points, or 0.3%, to 26,638, those for the S&P 500 ESU19, +0.44% advanced 8.40 points, or 0.3%, at 2,930.75, while Nasdaq-100 futures NQU19, +1.09% climbed 37 points, or 0.5%, to 7,665.75.

Mnuchin told CNBC that Beijing and Washington are nearing a deal on tariffs. “We were about 90% of the way there (with a deal) and I think there’s a path to complete this,” he told the financial network in Bahrain.

The Treasury Secretary said that he was “hopeful” that a deal could be struck as the market awaits a sideline conversation between President Donald Trump and Chinese President Xi Jinping at the Group of 20 gathering in Osaka, Japan, which kicks off on Friday.

Concerns about escalating trade tensions between the China and the U.S., the world’s largest economies, have fed a sense of rising uncertainty about the health of the global economy, at least partly contributing to central banks across the world signaling a willingness to reinstitute a fresh wave of economic stimulus.

On Tuesday, equity markets suffered one of the worst declines in about a month, led by a selloff in trade-sensitive informational technology shares, also among the risky assets that have helped to lead the S&P 500 index SPX, +0.21% last week to its first record since April 30. Even with yesterday’s slide, the Dow Jones Industrial Average DJIA, +0.12% stands about 1% shy of its Oct. 3 record, while the tech-heavy Nasdaq Composite Index COMP, +0.83% is within reach of its May 3 all-time closing high, despite giving up 121 points, or 1.5%, in the prior session.

Tuesday’s slump came as Federal Reserve Chairman Jerome Powell, speaking at the Council on Foreign Relations in New York, signaled that an interest-rate cut in July is not a done deal, emphasizing that the central banks was still monitoring the economy and “grappling” with signs of weakness to avoid a knee-jerk reaction as it considers dialing back benchmark rates.

What’s more, St. Louis Fed President James Bullard said he wasn’t advocating for a too-aggressive cut of 50 basis point to key federal-funds futures rates when the Fed meets next month.

Wall Street currently has the odds of an interest rate cut in July at 100%, according to the CME Group’s FedWatch tool.

“Positioning ahead of the G20 summit meeting between Trump and Xi could see investors want skin in the game ahead of what many feel could yield a very positive outcome,” said Edward Moya, senior market analyst at brokerage Oanda, in a daily research note.

“A reset of talks is likely becoming the base case scenario and if we see a timeline put in place, we could see equities resume the march towards uncharted territory,” he said.

There was more bad economic data on Wednesday, with durable-goods orders for May dropping 1.3%, weighed down by Boeing Co.’s BA, +0.33% woes from its grounded 737 MAX jets.

A separate report on international trade in goods also showed the U.S. trade deficit climbed 5.1% for the same month, which was wider than expected.

Market participants may also be partly watching the White House after reports indicated that Special counsel Robert Mueller will testify before the House Judiciary and Intelligence committees on July 17. Democrats have been wanting to hear from Mueller personally, regarding his investigation into Russian interference in the 2016 election as well as possible obstruction of justice by President Donald Trump.

Which stocks are in focus?
Shares of Apple Inc. AAPL, +2.36% were in focus after the iPhone maker and tech giant acquired autonomous-driving startup Drive.ai, according to multiple reports. Apple confirmed the deal to both Axios and the San Francisco Chronicle. Shares of Apple were up 1.2% in premarket action Wednesday.

Micron Technology Inc. shares MU, +11.20% rose 10% before the bell Wednesday after the memory-chip maker’s results topped lowered expectations for the quarter, and executives forecast improvement in the fourth quarter even though actual numbers were shy of expectations.

Shares of Boeing were up 0.7% in premarket action Wednesday.

MarketWatch [1]

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya [5]

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya