HONG KONG (AP) — World stocks were mixed Monday after U.S. President Donald Trump softened his tone on trade, saying he would seek a way to keep Chinese technology company ZTE in business despite U.S. sanctions. European markets were slightly weaker amid signs that Italy’s populist parties may form a government.
KEEPING SCORE: France’s CAC 40 dipped 0.3 percent to 5,525 and Germany’s DAX lost 0.4 percent to 12,946. Britain’s FTSE 100 edged 0.3 percent lower to 7,702 and Italy’s FTSE MIB dropped 0.7 percent to 23,994. Wall Street was poised to open higher. Dow futures advanced 0.3 percent and S&P 500 futures rose 0.2 percent.
TRUMP ON CHINA: In a surprise overture to Beijing, Trump tweeted that he wanted to help Chinese smartphone and telecom gear maker ZTE “get back into business, fast.” The company’s Hong Kong-traded shares have been suspended since U.S. authorities banned it last month for seven years from importing U.S. components in a case involving illegal exports to North Korea and Iran. China’s foreign ministry responded by saying it “highly commended” the move, ahead of trade talks in Washington this week.
ANALYST’S VIEW: “It seems Trump’s move is a good starting point, and likely to be welcomed by markets,” said Hussein Sayed, chief strategist at FXTM. “Many policymakers will criticize such a reversal, but from an investor’s perspective, it’s a sign of easing relations between the world’s two largest economies and should support risk-taking.”
ASIAN SCORECARD: Japan’s benchmark Nikkei 225 rose 0.5 percent to close at 22,865.86 while South Korea’s Kospi dipped 0.1 percent to end at 2,476.11. Hong Kong’s Hang Seng jumped 1.4 percent to 31,541.08 and the Shanghai Composite in mainland China added 0.3 percent to 3,174.03. Australia’s S&P/ASX 200 climbed 0.3 percent to 6,135.30. Taiwan shares rose but Southeast Asian indexes were mixed as Malaysian shares resumed trading after last week’s election. The benchmark FTSE Bursa Malaysia KLCI rose 1.3 percent to 1,873.07.
ITALIAN DEAL: Rival populist parties in Italy appeared close to being given the green light to form a government, after the president summoned them to discuss their coalition deal. The parties are both euroskeptic, a fact that has unnerved some investors, though the market reaction in Italy was still relatively muted on Monday. Italian bond yields were stable, suggesting investors are waiting to see if a government is actually formed and what policies they might agree on.
MALAYSIAN MARKETS: Malaysian markets reopened after a public holiday following 92-year-old Mahathir Mohamad’s surprise election victory. Shares of regional budget airline AirAsia fell as much as 13 percent early Monday after the carrier’s chief Tony Fernandes apologized for supporting defeated Prime Minister Najib Razak. By mid-afternoon they were down 5.1 percent. The benchmark index also rebounded after opening as more than 2 percent lower, rallying 1.4 percent, while Malaysia’s currency dipped in a knee-jerk reaction to uncertainties over the change in government.
ENERGY: The benchmark U.S. crude oil contract was flat at $70.70 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 66 cents to settle on Friday. Brent crude, used to price international oils, gained 11 cents to close at $77.23.
CURRENCIES: The dollar rose to 109.51 yen from 109.36 yen on Friday. The euro strengthened to $1.1987 from $1.1942.
– Here are the top five things you need to know in financial markets on Monday, May 14:
1. U.S.-China Trade Back In The Spotlight
Trade was back into focus after U.S. President Donald Trump said in a Sunday tweet that he was working with Chinese President Xi Jinping to give struggling Chinese telecom giant ZTE (HK:0763) “a way to get back into business, fast.”
The U.S. government had imposed a ban on U.S. companies from supplying ZTE with technology after the Chinese firm was found to have illegally shipped equipment to Iran.
With the second round of U.S.-China trade negotiations expected to kick off this week, the move by Trump was seen by some analysts as a concession from the U.S. side.
Chinese Vice Premier Liu He, Jingping’s top economic adviser, will attend the talks in Washington, which begin on Tuesday.
High-level discussions in Beijing earlier this month appeared to make little progress but there have been signs recently of some easing in tensions.
Trump struck an optimistic tone ahead of the meeting, saying that “it will all work out.”
2. Oil Prices Back Off Recent Highs
Oil prices edged lower, moving away from more than three-year highs touched recently, as a rise in U.S. drilling for new production dampened sentiment.
U.S. drillers added 10 oil rigs last week, bringing the total count to 844, the highest number since March 2015. That was the sixth consecutive weekly increase in the rig count, underscoring worries about rising U.S. output.
Losses were held in check as investors continued to assess the implications of President Donald Trump walking away from the Iran nuclear deal last week.
3. Dow Futures Up Nearly 100 Points
Dow futures rose, indicating stocks may be ready to pick up where they left off last week, as hopes of a thaw in U.S.-China trade tensions boosted sentiment.
The blue-chip Dow futures rose 92 points, or about 0.4%, the S&P 500 futures tacked on 6 points, or nearly 0.2%, while the tech-heavy Nasdaq 100 futures indicated a gain of 21 points, or roughly 0.3%.
Another win for the Dow Jones Industrial Average would mark its eighth-straight advance, the longest positive streak since one that ended Sept. 20, 2017.
While just 10 S&P 500 companies are due to report financial results this week, retailers are just getting started in what will be the last big wave of the first-quarter earnings season.
Home Depot (NYSE:HD) unofficially kicks things off when it reports on Tuesday; results from Macy’s (NYSE:M) are on the agenda for Wednesday; while Walmart (NYSE:WMT), the world’s largest retailer, is due to report results on Thursday.
Elsewhere, in Europe, the continent’s major bourses were slightly lower, as investors focused on Italian politics, trade relations between the U.S. and China, and a dip in oil prices.
Earlier, in Asia, most markets in the region closed higher, with Malaysian stocks recovering after dropping at the open as markets reopened following an election.
4. Dollar Falls For 4th Session In A Row
The dollar edged lower against a basket of the other major currencies, putting it on track for its fourth down session in a row.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down around 0.2% at 92.21.
The index hit four-and-a-half month highs of 93.26 last Wednesday before retreating to end the week almost unchanged, as tame U.S. inflation data tempered expectations for a faster pace of rate hikes by the Federal Reserve.
No top-tier U.S. economic data is on the calendar for Monday, but the rest of the week will be busy enough, with retail sales due Tuesday.
Elsewhere, the euro pushed higher even as two Italian political parties reached a deal that puts the country on course to be led by an antiestablishment and euroskeptic governing coalition.
The single currency changed hands at 1.1985 (EUR/USD), having recovered from last week’s lows of 1.1821, a level not seen since late December.
5. Fed Speakers Eyed For Rate Hikes Hints
A busy week for Federal Reserve speakers kicked off with Cleveland Fed President Loretta Mester, who has a vote on monetary policy this year, saying the central bank may need to raise interest rates above 3% if the U.S. economy grew faster than expected.
She made the comments at the Global Interdependence Center’s central banking series in Paris, France earlier on Monday.
Next up, St. Louis Fed President James Bullard is slated to speak about cryptocurrencies at the CoinDesk Consensus 2018 conference in New York at 9:40AMET (1340GMT).
Bullard on Friday spelled out the case against any further interest rate increases, saying rates may already have reached a “neutral” level that is no longer stimulating the economy.
Investors have fully priced in a rate rise at the Fed’s next policy meeting on June 12-13. However, Wall Street is divided over how many more time the central bank will raise interest rates after that.