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Oil, equities rise on trade optimism boost

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Oil, equities rise on trade optimism boost

➤ U.S. Treasury chief reportedly proposed cutting tariffs on Chinese imports.

➤ Global equities rally amid trade optimism despite Treasury denial of report.

➤ Ryanair profit warning weighs on European airlines; Netflix, Tesla slip pre-market.

➤ Oil rises on the back of lower OPEC production; yen and gold dip.

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U.S. stocks gathered momentum, while European equities tracked gains in Asia as signs of progress in trade negotiations between the U.S. and China helped lift sentiment in global markets.

Asian stocks bounced back from yesterday's declines amid a report that U.S. Treasury Secretary Steven Mnuchin proposed lifting some or all of the tariffs imposed on $250 billion in Chinese imports in a bid to reach a trade deal with Beijing. While U.S. Trade Representative Robert Lighthizer reportedly opposed the recommendation and Treasury officials denied that such proposals were made, the news buoyed trading in Asia, where the Shanghai SE Composite index closed 1.42% higher, Japan's Nikkei 225 advanced 1.29% and Hong Kong's Hang Seng Index rose 1.25%.

Those gains extended to Europe, with Germany's DAX index gaining 1.15% and France's CAC 40 rising 1.50%. The FTSE 100 index added 1.18% though shares in airlines declined, with easyJet PLC down more than 2% and International Consolidated Airlines Group SA losing 1%, as Ryanair Holdings PLC lowered its fiscal-year 2019 profit forecast for the second time in four months due to lower winter fares.

Meanwhile, futures point to U.S. stocks extending yesterday's gains at the open amid trade hopes, while the partial shutdown of the federal government enters its 28th day. Capital markets advisers have warned that the shutdown and potential turbulence in equity markets may make it tough for U.S. IPO activity to reach the same level this year as in 2018, as SEC staff are furloughed and unable to review requisite registration statements and declare them effective.

Netflix Inc. will be in focus today, with shares in the company down about 2% in pre-market trading, after the company reported lower-than-expected growth in paid streaming video members in the fourth quarter of 2018. Tesla Inc., meanwhile, tumbled about 8% pre-market after announcing a reduction in full-time employees by about 7% while increasing the production rate for its Model 3 sedans.

In currencies, sterling slipped 0.24% against the dollar and was down 0.45% against the euro amid lingering uncertainty surrounding Britain's impending exit from the European Union. British Prime Minister Theresa May said it was "impossible" to rule out a no-deal scenario, as demanded by opposition leader Jeremy Corbyn, amid proposed cross-party talks aimed at breaking the Brexit impasse.

The Japanese yen slid 0.15% against the dollar, while the euro rose 0.18%. Investors are now starting to question the European Central Bank's ability to stick to its guidance of at least one rate hike later this year amid weak economic data from the single-currency area, wrote Michael Hewson, chief market analyst at CMC Markets UK.

"It is much more likely that the ECB may well have to add extra stimulus in the absence of a pickup in either inflation or economic activity, and it is for this reason the euro is coming under pressure," Hewson wrote.

In commodities, oil rose 1.06% to $61.83 per barrel on the ICE Futures Exchange amid trade optimism and after the Organization of the Petroleum Exporting Countries reported that its crude oil production declined by 751,000 barrels per day in December 2018.

Yields on 10-year Treasurys were up 2 basis points to 2.77%. Gold dipped 0.54% to $1,285.30 per ounce.

More from S&P Global Market Intelligence:

Big banks remind markets they are still printing money

January retail market: 6 companies go bankrupt; strong holiday sales expected

Payments would be a haven if economy turns, analysts say ahead of Q4'18 earnings

Investor 'skittishness' slowing industrial real estate deal flow

Zurich's $100M cyber claim battle could trigger policy overhaul

The day ahead:

8:30 a.m. ET – Canada consumer price index (Econoday consensus: -0.3% month over month, 1.7% year over year)

9:05 a.m. ET – Fed's John Williams speaks

9:15 a.m. ET – U.S. industrial production (Econoday consensus: 0.3% month over month)

10 a.m. ET – University of Michigan's U.S. consumer sentiment index (Econoday consensus: 97.0)

1 p.m. ET – Baker-Hughes rig count