China’s Xi speaks with Trump by phone, discusses Taiwan and bilateral ties
Investing.com - Futures linked to the main U.S. averages tick up, with the trajectory for Federal Reserve interest rates in focus. Oil prices slip as the United States and Ukraine hold talks over a possible plan to end the war with Russia. Life sciences group Agilent is due to report its latest results, while PC maker Lenovo is reportedly stockpiling memory chips amid an artificial intelligence-driven supply squeeze.
1. Futures higher
U.S. stock futures pointed higher on Monday, as investors assessed the chances of a Federal Reserve interest rate reduction next month.
By 02:48 ET (07:48 GMT), the Dow futures contract had risen by 153 points, or 0.3%, S&P 500 futures had climbed by 41 points, or 0.6%, and Nasdaq 100 futures had increased by 213 points, or 0.9%.
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Although expectations have grown that the Fed could roll out another rate cut at its final policy meeting of the year in December, officials have largely signaled a lack of unity over the matter. Some policymakers have argued that a fall in borrowing costs may be needed to bolster a flagging labor market, although others have cautioned against such a move, citing the likelihood that the recent federal government shutdown will leave the Fed with only outdated, stale economic data.
Still, markets widely see a more than 70% that a 25-basis point rate drawdown is coming, according to CME’s FedWatch Tool. The Fed previously unveiled equally-sized cuts in September and October.
These bets boosted the main averages on Wall Street on Friday. But all three of the indices notched weekly losses, dragged down by fears over frothy technology sector valuations and the sustainability of heavy spending on artificial intelligence infrastructure.
2. Oil slips amid Ukraine peace talks
Oil prices inched down, with analysts weighing both the outlook for Fed policy and the possibility of a U.S.-brokered Russia-Ukraine peace deal being reached.
By 03:09 ET, Brent crude futures had dipped by 0.4% to $61.70 a barrel, while West Texas Intermediate was mostly unchanged at $57.81 per barrel.
The United States and Ukraine were anticipated to carry on negotiations over a potential peace agreement which would bring a halt to the latter’s prolonged war with Russia. Both sides said on Sunday they would make changes to an initial proposal put forward by U.S. President Donald Trump, which critics have claimed was too favorable for Russia.
Trump previously urged Ukraine to sign on to the peace plan by Thanksgiving later this week, but U.S. Secretary of State Marco Rubio has suggested the deadline was not unmovable.
"Developments related to a potential peace agreement are important for the oil market, particularly amid significant uncertainty about the impact of recently imposed sanctions on Russia’s [oil majors] Rosneft and Lukoil," analysts at ING said in a note.
"Clearly, a peace deal increases the likelihood that sanctions will be lifted, or at least not enforced strictly."
3. Gold under pressure
Gold prices edged down, pressured by improving risk appetite following the rebound in wagers on a December interest rate cut by the Fed.
A recovery in equities and other risk-driven markets largely sapped demand for gold, as did reports around Russia-Ukraine ceasefire talks.
But lingering concerns over global fiscal health and a diplomatic spat between China and Japan offered some support to gold, with the yellow metal hovering above $4,000 an ounce. Traders were also gearing up for a barrage of key U.S. economic readings this week.
Spot gold was steady at $4,064.70/oz, while gold futures for December fell 0.4% to $4,097.80/oz by 03:48 ET.
4. Agilent to report
On the earnings calendar, investors will be keeping tabs on an ebbing stream of quarterly reports this week.
Life sciences firm Agilent Technologies will highlight the agenda on Monday, with observers keen to see how the company is grappling with tepid order levels over the last two years. Still, there have been signs that demand for its tools and services needed to develop new medicines has stayed resilient.
In August, the firm raised its annual revenue outlook to between $6.91 billion and $6.93 billion, up from $6.73 billion to $6.81 billion previously.
Full-year profit was also tipped to be $5.56 to $5.59 per share, versus a prior projection of $5.54 to $5.61 a share.
For its fiscal fourth quarter, Agilent is tipped to post adjusted earnings per share of $1.59 on net revenue of $1.83 billion, Bloomberg consensus estimates have shown.
5. Lenovo stockpiling PC memory amid AI supply squeeze - Bloomberg
Lenovo Group, the world’s largest PC maker, is stockpiling memory chips amid an unprecedented supply squeeze due to the artificial intelligence industry, CFO Winston Cheng told Bloomberg TV on Monday.
The company is stockpiling component inventories that are roughly 50% higher than usual, Cheng said, as outsized memory demand from AI data centers and cloud hardware tightened memory chip supplies and ramped up prices.
This trend is also expected to raise the prices of consumer electronics, which could hurt demand for Lenovo’s products in the coming quarters.
But Cheng said Lenovo also sees an opportunity to capitalize on its high inventories, and will aim to avoid passing on costs to its consumers.
The group clocked a mild decline in its September quarter profit last week, as increased spending on AI partially offset strong PC and device sales.