8th Jan 2019 13:54
WASHINGTON (Alliance News) - The major US index futures are pointing to a higher opening on Tuesday, with stocks likely to extend the strong upward move seen over the two previous sessions.
Optimism about trade talks between the US and China may continue to generate buying interest on Wall Street amid a second day of meetings between US and Chinese officials.
The second day of negotiations coincided with an unannounced visit by North Korean leader Kim Jong Un, with some analysts saying China could use Kim's visit as a bargaining chip in the trade talks.
In a post on Twitter this morning, President Donald Trump claimed, "Talks with China are going very well!"
Traders remain skeptical about the potential for a long-term trade deal, however, potentially keeping buying interest somewhat subdued.
A relatively quiet day on the US economic front may also keep some traders on the sidelines amid the ongoing government shutdown.
Following the substantial rally seen last Friday, stocks saw some further upside over the course of the trading session on Monday. With the upward move, the major averages continued to offset the sell-off seen last month.
The major averages pulled back off their best levels in afternoon trading but remained firmly positive. The Dow rose 98.19 points or 0.4% to 23,531.35, the Nasdaq surged up 84.61 points or 1.3% to 6,823.57 and the S&P 500 climbed 17.75 points or 1.7% to 2,549.69.
The continued strength on Wall Street partly reflected optimism about high-level trade talks between the US and China in Beijing.
Deputy US Trade Representative Jeffrey Gerrish is leading the US team at the two-day meeting, with a spokesman for China's Foreign Ministry predicting "positive and constructive discussions."
Meanwhile, traders largely shrugged off a report from the Institute for Supply Management showing growth in US service sector activity slowed by more than anticipated in the month of December.
The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. While a reading above 50 still indicates service sector growth, economists had expected the index to dip to 59.0.
"The non-manufacturing sector's growth rate cooled off in December," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "Respondents indicate that there still is concern about tariffs, despite the hold on increases by the US and China."
Last Thursday, the ISM released a separate report showing a notable slowdown in the pace of growth in US manufacturing activity in December
The purchasing managers index tumbled to 54.1 in December after rising to 59.3 in November, hitting its lowest level since November of 2016. Economists had expected the index to slip to 57.9.
Oil service stocks moved sharply higher over the course of the session, resulting in a 4.4% spike by the Philadelphia Oil Service Index. The rally by oil service stocks comes amid an increase by the price of crude oil.
Considerable strength was also visible among biotechnology stocks, as reflected by the 3.4% jump by the NYSE Arca Biotechnology Index.
Loxo Oncology (LOXO) led the sector higher after the biopharmaceutical company agreed to be acquired by drug giant Eli Lilly (LLY) for USD235 per share in cash or approximately USD8 billion.
Retail stocks also turned in a particularly strong performance on the day, driving the Dow Jones Retail Index up by 2.7%.
Natural gas, semiconductor, networking and computer hardware stocks also saw significant strength, while gold and utilities stocks bucked the uptrend.
Commodity, Currency Markets
Crude oil futures are advancing USD0.77 to USD49.29 barrel after climbing USD0.56 to USD48.52 a barrel on Monday. Meanwhile, after rising USD4.10 to USD1,289.90 ounce in the previous session, gold futures are falling USD7.70 to USD1,282.20 an ounce.
On the currency front, the US dollar is trading at 108.81 yen compared to the 108.72 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at USD1.1439 compared to yesterday's USD1.1474.
Asia
Asian stocks ended mixed on Tuesday despite optimism over US-China trade talks as US officials held a second day of trade talks with Chinese counterparts in Beijing.
The second day of negotiations coincided with an unannounced visit by North Korean leader Kim Jong Un, with some analysts saying China could use Kim's visit as a bargaining chip in the US trade talks.
China's Shanghai Composite Index fell 0.3% to 2,526.46, while Hong Kong's Hang Seng Index rose 0.2% to 25,875.45.
Japanese shares ended on a positive note after Amazon and Microsoft fueled a second straight session of gains on Wall Street overnight.
The Nikkei 225 Index gained 165.07 points or 0.8% to finish at 20,204.04, and the broader Topix closed 0.4% higher at 1,518.43.
Automaker Honda Motor rallied 3.2% and Toyota rose 1.2%, while banks Mitsubishi UFJ Financial, Sumitomo Mitsui Financial and Mizuho Financial advanced between 0.3% and 1.3%.
Takeda Pharmaceutical climbed 2.3% after completing its acquisition of Irish drugmaker Shire PLC. Inpex and Japan Petroleum gained around 1% after crude oil prices rose more than 1% overnight.
Olympus Corp jumped 8.4% after Morgan Stanley upgraded the stock's rating to Overweight from Equal-Weight.
South Korean stocks fell as investors monitored the second day of trade talks between the US and China. The benchmark Kospi dropped 0.6% to 2,025.27. Samsung Electronics tumbled 1.7% after forecasting much weaker than expected fourth quarter results.
On the data front, South Korea posted a current account surplus of USD5.06 billion in November, the Bank of Korea said, down from the USD9.19 billion surplus in October. The goods account surplus stood at USD7.97 billion, down from USD11.46 billion in November of 2017.
Australian markets stocks notably higher amid signs that Beijing and Washington may be inching toward a trade deal.
Traders shrugged off weak trade data showing that Australia had a seasonally adjusted merchandise trade surplus of AUD1.925 billion in November, shy of expectations for a surplus of AUD2.175 billion and down from AUD2.316 billion in October.
The benchmark S&P/ASX 200 Index rose 0.7% to 5,722.40, while the broader All Ordinaries Index ended higher by 0.7% at 5,783.30.
Banks ANZ, NAB and Westpac rose between 0.9% and 1.2%. Waste management giant Bingo Industries soared 5.7% after it offered to sell its Sydney processing plant to address antitrust concerns related to the planned acquisition of Dial-a-Dump.
Gold miner Evolution lost 3.4%, St Barbara tumbled 5% and Northern Star Resources declined 2.6% as dovish comments from the Fed boosted investors' appetite for risk.
Sleep device maker ResMed advanced 1.4% after completing the USD225 million acquisition of US-based asthma and pulmonary specialist Propeller Health.
Europe
European stocks have risen on Tuesday as investors express hopes for a trade deal between the US and China and the Italian government approved a decree aimed at shoring up troubled lender Banca Carige.
While the French CAC 40 Index has jumped by 1.6%, the German DAX Index and the UK's FTSE 100 Index are up by 1.2% and 1.1%, respectively.
Shares of Carrefour have rallied in Paris after Bank of America Merrill Lynch upgraded its rating on the company's stock to buy.
Rolls- Royce Holdings has also jumped in London after Britain's Serious Fraud Office dropped its investigation of some individuals associated with the company.
Meanwhile, shares of Sika AG have fallen following reports the specialty chemicals company will buy French rival Parex for USD2.55 billion.
WM Morrison Supermarkets has also fallen after a disappointing trading update as it reported a sharp slowdown in sales growth at its stores over Christmas.
On the data front, Eurozone economic sentiment decreased more than expected in December to its lowest level since the start of 2017, survey data from the European Commission showed.
The economic sentiment index dropped to 107.3 from 109.5 in November. Economists had predicted a reading of 108.2.
France's merchandise trade deficit widened sharply in November and was worse than economists' forecast, preliminary figures from the French Customs showed.
The visible trade deficit rose to 5.1 billion euros from 4.1 billion euros in October. Economists had expected a shortfall of 4.9 billion euros for November. A year ago, the deficit was 5.96 billion euros.
German industrial production decreased for a third straight month in November, defying expectations for an increase, amid a sharp drop in consumer goods and energy output, preliminary data from the Federal Statistical Office revealed.
Industrial production fell a calendar and seasonally adjusted 1.9% from October, when it decreased 0.8%. Economists had expected a 0.3% increase.
The British pound was little changed as a report showed British house prices unexpectedly surged in December and UK Brexit Secretary Stephen Barclay denied a report in the Telegraph that UK officials are "putting out feelers" in Brussels about an extension to the Article 50 notice.
US Economic Reports
At 10 am ET, the Labor Department is scheduled to release the results of its Job Openings and Labor Turnover Survey for November.
The Treasury Department is due to announce the results of its auction of USD38 billion worth of three-year notes at 1 pm ET.
At 3 pm ET, the Federal Reserve is scheduled to release its report on consumer credit in the month of November. Consumer credit is expected to increase by USD18.0 billion.
Stocks In Focus
Shares of Union Pacific (UNP) are moving significantly higher in pre-market trading after the railway operator named industry veteran Jim Vena as its chief operating officer.