Global Stocks Edge Higher but Trade Tensions Hold in Focus
By Donato Paolo Mancini
Global stocks ticked higher Monday after climbing last week, as trade tensions remained a pressure point amid weakening world economic growth.
U.S. futures pointed to a 0.2% opening gain for the Dow Jones Industrial Average and a flat open for the S&P 500. Wells Fargo & Co. shares shed 1.4% in U.S. premarket trading after the bank cut its outlook for net interest income. Investors were also parsing results from Citigroup Inc. and Goldman Sachs Group Inc., where profit fell 21%, reflecting a slowdown in trading.
In Europe, the pan-continental Stoxx Europe 600 gained 0.3% in midday trade, with its major and regional banks subsectors rising the most.
Bond yields have recently signaled increased optimism about the economy, steepening the yield curve -- a bullish sign for investors. On Monday, 10-year U.S. Treasury yields ticked up to 2.564% from 2.560% Friday afternoon. Yields move inversely to prices.
"Financials will clearly benefit after having suffered through a curve flattening for such a prolonged period," said Seema Shah, global investment strategist at Principal Global Investors.
The WSJ dollar index, which measures the greenback against a basket of 16 peers, was 0.1% lower.
In Asia, Hong Kong's Hang Seng slipped 0.3% after rallying in earlier trading, while Japan's Nikkei 225 jumped 1.4%.
Earnings will remain in focus this week, with big names like Bank of America and Netflix set to report numbers.
Trade tensions between the U.S. and China remained, though U.S. Treasury Secretary Steven Mnuchin said the countries were "getting close to the final round of concluding issues." Two phone calls are scheduled this week, but in-person meetings will likely be needed to seal any deal.
"It's very clear that there's a matching will to de-escalate," said Trinh Nguyen, a Hong Kong-based senior economist for emerging Asia, with Natixis. "The extent to which it will be de-escalated is the question."
"This is why I say extension-trade is the theme of the year," she said, referring to markets' tendency to kick the can down the road. "The global economy cannot take an escalated U.S.-China trade war, particularly because a U.S. president is up for re-election. He needs the situation to be smooth-sailing."
Central bank signals and International Monetary Fund remarks underscored the cautious mood after upbeat U.S. bank earnings last week buoyed markets, with the S&P 500 notching its third consecutive week of gains.
In its annual report on global fiscal policies, the IMF singled out Germany, Korea and Australia as countries that could do more to boost the slowing global economy, while central banks, including the Federal Reserve and the European Central Bank, signaled continued dovishness.
"Markets currently only want to know whether a rebound of the global economy is in the cards or not," said Carsten Brzeski, chief economist at ING in Germany.
Market participants will be paying close attention to Chinese data, including gross domestic product, later this week.
Later Monday, U.S. and Japanese delegations will meet in Washington to discuss trade arrangements. The move comes nearly seven months after both countries agreed to start bilateral trade talks.
In individual equities, Publicis Groupe SA gained 1.7% after solid first-quarter numbers. The Wall Street Journal reported Saturday that Publicis would acquire Epsilon, Alliance Data System Corp.'s marketing-services business, for $4.4 billion, a move that will modernize the French giant.
In commodities, Brent crude, the global benchmark, slid 0.8% to $71.00 a barrel, dragging the Stoxx Europe 600's oil-field service and equipment subsector. Gold lost 0.5% to $1,288.90 an ounce.