Morning Call: U.S. stocks rally on optimism a trade resolution between China and the U.S. is near; Mar E-mini S&Ps up +0.86%; USD/JPY down -0.29% at a 4-1/4 month low.
Barchart.com - Mon Dec 31, 6:37AM CST
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 ESH19 - S&P 500 E-Mini
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GCG191,325.1s-0.8-0.06%
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Overnight Markets and News

Mar E-mini S&Ps (ESH19 +0.95%) are up +0.86% and European stocks are up +0.41% on optimism a resolution to the U.S.-China trade rift may be near after President Trump said he spoke on the phone Saturday with Chinese President Xi Jinping and that negotiations were "moving along very well" and they made "big progress" toward cutting a trade deal. Mining stocks and commodity producers are leading the overall market higher with Feb COMEX gold (GCG19 +0.16%) up +0.21% at a 6-1/2 month high. The global stock market turmoil seen over the past month has boosted demand for gold as a store of wealth as long gold positions in ETFs climbed to a 6-1/2 month high last Friday. Chinese growth concerns remain, however, after the China Dec manufacturing PMI unexpectedly contracted at the steepest pace in nearly 3 years. Asian stocks settled mixed: Japan, China, Taiwan and South Korea closed for holidays. Hong Kong +1.34%, Australia -0.14%, Singapore +0.50%, India -0.02%.

The dollar index (DXY00 -0.16%) is down -0.20% as the partial U.S. government shutdown entered its tenth day with no signs of resolution. EUR/USD (^EURUSD +0.03%) is up =0.02% on reduced Italian political risks after Italy's government won final parliamentary approval for its 2019 budget. USD/JPY (^USDJPY -0.30%) is down -0.29% at a 4-1/4 month low after IMF data showed the yen's share of global reserves rose to 5% in Q3, the highest in 16-years, as market turmoil boosted safe-haven demand for the yen.

Mar 10-year T-note prices (ZNH19 +0-015) are up +1.5 ticks.

The China Dec non-manufacturing PMI unexpectedly rose +0.4 to 53.8, stronger than expectations of -0.2 to 53.2.

The China Dec manufacturing PMI unexpectedly fell -0.6 to 49.4, weaker than expectations of no change at 50.0 and the steepest pace of contraction in 2-3/4 years.

U.S. Stock Preview

Key U.S. news today includes: (1) Dec Dallas Fed manufacturing activity (expected -2.6 to 15.0, Nov -11.8 to 17.6).

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: Goldman Sachs Health Care CEO Conference on Thu.

Market Comments

Mar S&P 500 E-minis (ESH19 +0.95%) this morning are up +21.50 points (+0.86%). Friday's closes: S&P 500 -0.12%, Dow Jones -0.33%, Nasdaq 100 -0.05%. The S&P 500 on Friday fell back from a 1-week high and closed lower on the unexpected -0.7% m/m decline in U.S. Nov pending home sales (weaker than expectations of +1.0% m/m) and on ongoing U.S. political risks that may curb economic growth as the partial shutdown of the U.S. government hit its seventh day with no prospect for a resolution. Stocks found support on the -1.0 point decline in the U.S. Dec Chicago PMI to 65.4, which was stronger than expectations of -6.2 to 60.2. Energy stocks saw some strength after crude oil prices rose +1.61%.

Mar 10-year T-notes (ZNH19 +0-015) this morning are up +1.5 ticks. Friday's closes: TYH9 +3.00, FVH9 +2.25. Mar 10-year T-notes on Friday rallied to a new contract high and closed higher. T-note prices were boosted by unexpected decline in U.S. Nov pending home sales and by reduced inflation expectations after the 10-year T-note breakeven inflation expectations rate sank to a 1-1/2 year low.

The dollar index (DXY00 -0.16%) this morning is down -0.196 (-0.20%). EUR/USD (^EURUSD +0.03%) is up +0.0002 (+0.02%). USD/JPY (^USDJPY -0.30%) is down -0.32 (-0.29%) at a 4-1/4 month low. Friday's closes: Dollar Index -0.079 (-0.08%), EUR/USD +0.0014 (+0.12%), USD/JPY -0.74 (-0.67%). The dollar index on Friday fell to a 1-week low and closed lower on U.S. political risks as the partial shutdown of the U.S. government entered its seventh day with no prospect for a resolution. The dollar was also undercut by the unexpected decline in U.S. Nov pending home sales, which was dovish for Fed policy.

Metals prices this morning are mixed. Feb gold (GCG19 +0.16%) is up +2.7 (+0.21%) at a 6-1/2 month high, Mar silver (SIH19 +0.58%) is up +0.089 (+0.58%), and Mar copper (HGH19 -0.13%) is down -0.002 (-0.07%). Friday's closes: Feb Comex gold (GCG19) on Friday closed up +1.9 (+0.15%) and March silver closed up +0.126 (+0.82%). Feb gold on Friday climbed to a fresh 6-1/4 month high and Mar silver rose to a new 4-1/2 month high. A slide in the dollar index to a 1-week low Friday fueled buying of precious metals. Also, stock market volatility has boosted safe-demand for precious metals. In addition, U.S. political risks are boosting demand for gold as store of wealth as the partial shutdown of the U.S. government hit its seventh day with no prospect for a resolution. President Trump said he won't relent on the partial government shutdown unless Congress funds his border wall, which raises the prospect for an extended shutdown. The turmoil in global equity markets increased demand for gold as a store of wealth as long gold positions in ETFs rose to a 6-1/4 month high on Wednesday. A negative for silver prices is ongoing fund selling as long silver positions in ETFs fell for an eighth consecutive session to a 10-1/2 month low on Thursday.

Feb crude oil prices (CLG19 +2.18%) this morning are up +89 cents (+1.96%) and Feb gasoline (RBG19 +2.62%) is up +3.50 (+2.69%). Friday's closes: Feb WTI crude oil (CLF19) on Friday closed up by +0.72 161.55%) and Feb Brent crude (CBG19) closed up +0.04 (+0.07%). Feb RBOB gasoline (RBF19) closed up +1.64 cents per gallon (+1.28%). A decline in the dollar index to a 1-week low Friday pushed the energy complex higher. A rally in U.S. and European equities was another positive factor for energy prices. The upside in crude prices was contained after weekly EIA crude inventories fell -46,000 bbl, a smaller decline than expectations of -3.0 million bbl, and after EIA gasoline stockpiles jumped +3.003 million bbl, well above expectations of +1.0 million bbl build. U.S. oil production in Friday's EIA report (for the week ended Dec 21) was up +0.9% w/w to 11.7 million bpd and matched November's record high. Also, crude supplies at Cushing, OK, delivery point of WTI futures, rose +799,000 bbl to an 11-month high. Friday's data from Baker Hughes was negative as well as active U.S. oil rigs rose +2 in the week of Dec 28 to 885, just below the 3-3/4 year high of 888 from the week of Nov 16.

Overnight U.S. Stock Movers

Boeing (BA -0.24%) was awarded a $400 million contract from the U.S. Air Force for B-1 and B-2 bomber engineering services.

iStar Financial (STAR +0.33%) was upgraded to 'Outperform' from 'Market Perform' at JMP Securities with a price target of $11.50.

CRIPR Therapeutics AG (CRSP +1.29%) rose almost 3% on after-hours trading after Vertex, the company's second-largest shareholder, raised its stake in the company to 10.4%.

Ocular Therapeutics (OCUL +6.72%) may initially open lower this morning after it filed a $200 million mixed securities shelf.