December S&P 500 E-Mini futures (ESZ25) are up +0.29%, and December Nasdaq 100 E-Mini futures (NQZ25) are up +0.41% this morning as signs of easing trade tensions between the U.S. and China helped boost risk appetite.
U.S. President Donald Trump last week moved to ease concerns over a trade war with China. President Trump on Friday confirmed plans to meet with Chinese leader Xi Jinping at the end of the month in South Korea. When asked by Fox News on Sunday about his threat to impose an additional 100% tariff on Chinese goods, Trump said the levy was “not sustainable,” though “it could stand.” He added that he thinks “we’re going to be fine” with China. Notably, a new round of U.S.-China trade talks is scheduled to take place this week in Malaysia between Treasury Secretary Scott Bessent and Vice Premier He Lifeng.
This week, investors also look ahead to the release of key U.S. inflation data and a slew of corporate earnings reports.
In Friday’s trading session, Wall Street’s major equity averages ended in the green. Most members of the Magnificent Seven stocks advanced, with Tesla (TSLA) rising over +2% and Apple (AAPL) gaining nearly +2%. Also, Kenvue (KVUE) surged more than +8% and was the top percentage gainer on the S&P 500 after rejecting allegations from a lawsuit filed last Thursday in the U.K. High Court, stating that its baby powder “did not contain asbestos, and does not cause cancer.” In addition, American Express (AXP) climbed over +7% and was the top percentage gainer on the Dow after the credit card giant posted upbeat Q3 results and raised the lower end of its full-year guidance. On the bearish side, chip and AI infrastructure stocks slumped, with Oracle (ORCL) sliding more than -6% and Arm Holdings (ARM) falling over -3% to lead losers in the Nasdaq 100.
St. Louis Fed President Alberto Musalem said on Friday that he could back another rate cut to support a cooling labor market but stressed that policymakers should decide on a meeting-by-meeting basis amid economic uncertainty. Musalem added that he views the current stance of Fed policy as “somewhere between modestly restrictive and neutral.”
U.S. rate futures have priced in a 98.9% chance of a 25 basis point rate cut at the conclusion of the Fed’s October meeting.
Third-quarter corporate earnings season kicks into high gear this week, with investors awaiting fresh reports from major companies such as Tesla (TSLA), Netflix (NFLX), Coca-Cola (KO), Intel (INTC), International Business Machines (IBM), Texas Instruments (TXN), Lam Research (LRCX), AT&T (T), T-Mobile US (TMUS), Philip Morris (PM), and Procter & Gamble (PG). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +7.2% increase in quarterly earnings for Q3 compared to the previous year, marking the smallest rise in two years.
Meanwhile, the U.S. government shutdown continues, with no serious negotiations taking place. The shutdown means that official U.S. economic data continue to be delayed, giving Fed officials only a partial view of the economy. However, the Department of Labor has recalled a limited number of employees to release the September inflation report on a delayed basis this Friday, just four days before the October FOMC meeting.
“We continue to expect the impact of the higher tariffs to keep building in the coming months, particularly in import-intensive sectors, but it will be interesting to see if the areas that have already seen spikes in prices, such as audio equipment and bananas, see further price pressures,” HSBC economists said in a note.
Market watchers will also keep a close eye this week on preliminary purchasing managers’ surveys on U.S. manufacturing and services sector activity, the National Association of Realtors’ existing home sales data, and the University of Michigan’s Consumer Sentiment Index.
U.S. central bankers are in a media blackout period before the October 28-29 policy meeting, so they are prohibited from making public comments this week.
Today, investors will focus on the Conference Board’s Leading Economic Index for the U.S., which is set to be released in a couple of hours. Economists expect the September figure to rise +0.1% m/m following a -0.5% m/m drop in August.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.018%, up +0.20%.
The Euro Stoxx 50 Index is up +0.59% this morning as sentiment improves on hopes for a de-escalation in U.S.-China trade tensions. Bank stocks were among the biggest gainers on Monday as concerns about the health of the U.S. credit market eased. Defense stocks also climbed after conflict reignited in Gaza over the weekend and amid low expectations for any near-term peace agreement between Russia and Ukraine. Data from the federal statistics office released on Monday showed that Germany’s monthly producer prices unexpectedly fell in September. Separately, data showed that the Eurozone’s seasonally adjusted current account surplus shrank in August, primarily due to a sharp decline in the trade surplus. Meanwhile, S&P Global Ratings, in an unscheduled move on Friday, downgraded France’s credit rating to A+ from AA- with a stable outlook, citing that the country’s budget uncertainty “remains elevated” despite the submission of a draft 2025 budget. Investor focus this week is on the Eurozone’s preliminary purchasing managers’ surveys on manufacturing and services activity for October, along with the EU Summit. In corporate news, Kering (KER.FP) climbed over +3% after agreeing to sell its beauty business to L’Oreal for 4 billion euros ($4.66 billion).
Germany’s PPI and Eurozone’s Current Account data were released today.
The German September PPI fell -0.1% m/m, weaker than expectations of +0.1% m/m.
Eurozone August Current Account stood at 11.9 billion euros, weaker than expectations of 22.5 billion euros.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.63%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +3.37%.
China’s Shanghai Composite Index closed higher today as sentiment improved amid signs of easing U.S.-China trade tensions. U.S. Treasury Secretary Scott Bessent said Friday he plans to meet with Chinese Vice Premier He Lifeng in Malaysia this week to prevent an escalation of U.S. tariffs on Chinese goods, which U.S. President Donald Trump described as unsustainable. AI-related and robotics stocks outperformed on Monday. Investors largely looked past weak economic data from the country. The National Bureau of Statistics said on Monday that China’s economy grew at its slowest pace in a year in the third quarter, reinforcing the case for further policy stimulus. Goldman Sachs analysts said, “China’s full-year growth target remains largely on track, though incremental and targeted easing is still necessary in coming quarters to ensure stable growth and employment into next year.” September data pointed to mixed momentum across key sectors, with fixed-asset investment seeing a slight decline and retail sales growing at their slowest pace since November, while industrial production rose more than expected. In addition, official data showed that China’s new home prices continued to fall in September. Meanwhile, China kept its benchmark lending rates unchanged for the fifth straight month on Monday, despite the continued slowdown in the world’s second-largest economy. The one-year loan prime rate was unchanged at 3.0%, while the five-year rate remained at 3.5%, according to the People’s Bank of China. The data and LPR decision came just hours before state news agency Xinhua announced the start of the highly anticipated four-day Fourth Plenum in Beijing, which will outline China’s economic, political, and social priorities along with its five-year development plan. Although the detailed plan won’t be released until March next year, investors will closely examine the post-meeting readout for policy clues ahead of the potential meeting between Chinese President Xi Jinping and U.S. President Donald Trump.
The Chinese GDP has been reported at +1.1% q/q and +4.8% y/y in the third quarter, stronger than expectations of +0.8% q/q and +4.7% y/y.
The Chinese September Industrial Production rose +6.5% y/y, stronger than expectations of +5.0% y/y.
The Chinese September Retail Sales rose +3.0% y/y, in line with expectations.
The Chinese Fixed Asset Investment unexpectedly fell -0.5% y/y in the January-September period, weaker than expectations of +0.1% y/y.
The Chinese September Unemployment Rate was 5.2%, stronger than expectations of 5.3%.
Japan’s Nikkei 225 Stock Index closed sharply higher and hit a record high today on expectations that pro-stimulus Sanae Takaichi will be elected as the nation’s next prime minister. The ruling Liberal Democratic Party and the Japan Innovation Party (Ishin) have largely reached an agreement and are set to sign their coalition deal later today, according to Ishin co-leader Hirofumi Yoshimura. Takaichi, as leader of the LDP, is virtually assured to become prime minister with Ishin’s backing in a vote expected on Tuesday. Yutaka Miura, senior technical analyst at Mizuho Securities, said, “Expectations of a Takaichi administration have risen, and that’s fueling stock buying on hopes of her proactive fiscal policies.” Easing U.S.-China trade tensions also boosted sentiment. Technology stocks led the gains on Monday as Takaichi pledged to inject more government spending into the industry, which she considers strategic. Financial stocks also jumped, mirroring Friday’s gains in their U.S. peers as concerns over broader credit stress in the U.S. economy eased. Meanwhile, Bank of Japan board member Hajime Takata said on Monday that the central bank should raise interest rates, noting that tariff-related concerns have subsided and the bank’s inflation target is close to being achieved. “I believe that now is a prime opportunity to raise the policy interest rate,” Takata said. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -15.45% to 30.04.
Pre-Market U.S. Stock Movers
Apple (AAPL) advanced more than +1% in pre-market trading after Loop Capital upgraded the stock to Buy from Hold with a price target of $315.
KLA Corp. (KLAC) rose over +1% in pre-market trading after Barclays upgraded the stock to Overweight from Equal Weight with a price target of $1,200.
The Cooper Companies (COO) climbed more than +6% in pre-market trading after The Wall Street Journal reported that activist investor Jana Partners has built a stake in the company and plans to push for strategic alternatives.
Boeing (BA) gained over +1% in pre-market trading after the Federal Aviation Administration said on Friday it would allow the aerospace giant to increase production of its 737 MAX to 42 planes a month from 38.
Marvell Technology (MRVL) fell over -1% in pre-market trading after Barclays downgraded the stock to Equal Weight from Overweight with an unchanged price target of $80.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - October 20th
WR Berkley (WRB), Steel Dynamics (STLD), Crown (CCK), AGNC Invest (AGNC), Wintrust (WTFC), VinFast (VFS), Zions (ZION), BOK Financial (BOKF), Cadence Bancorp (CADE), Cleveland-Cliffs (CLF), RLI (RLI), ServisFirst Bancshares (SFBS), Dynex Capital (DX), Preferred Bank (PFBC), Hbt Fin (HBT), Washington Trust (WASH), Home Bancorp (HBCP), RBB Bancorp (RBB), Flexsteel (FLXS).
