Five things to watch in markets in the week ahead
Investing.com - U.S. stock futures spike following weekend comments from President Donald Trump which helped to assuage some fears over a renewed escalation in U.S.-China trade tensions. Trump, who had said he could place sky-high new levies on Beijing, said he was not looking to "hurt" China. Exports from China top estimates in September, but the trade spat clouds over the wider economic outlook. A hunt by investors for safe havens powers gold to a fresh record high, while oil also climbs.
1. Futures surge
U.S. stock futures pointed sharply higher on Monday, as investors noted a potentially more conciliatory tone from President Donald Trump after he previously threatened to slap steep new tariffs on China.
By 03:19 ET (07:19 GMT), the Dow futures contract had risen by 468 points, or 1.0%, S&P 500 futures had jumped by 96 points, or 1.5%, and Nasdaq 100 futures had surged by 472 points, or 1.9%.
The main averages on Wall Street slumped on Friday, driven down by social media posts from Trump which revived fears over a widespread trade war between the world’s two largest economies. Following Beijing’s announcement of expanded export controls on some rare earth materials, which serve critical roles across a host of industries, Trump said he would place additional levies of 100% on U.S.-bound goods incoming from China.
He also warned of new U.S. export controls on "any and all critical software" by November 1, and suggested that there was no longer a reason to meet with Chinese counterpart Xi Jinping at a highly-anticipated summit in South Korea later this month. However, the planned gathering was not scrapped altogether.
Trump’s statements refueled market concerns over the risks posed by possibly escalating international tariffs, which had been relatively quiet since a tentative detente between the U.S. and China earlier this year.
2. Trump says U.S. not looking to "hurt" China
Yet Trump has since seemingly adopted a less strident stance, saying over the weekend that everything would be fine and that Washington was not looking to "hurt" China.
Beijing, at the same time, backed its export curbs on rare earth elements and equipment as a necessary reaction to U.S. aggression, although it did not place new duties on U.S. items.
"This latest dispute could still blow over if cool heads prevail," analysts at Capital Economics argued in a note, adding that the planned meeting between Trump and Xi could provide "an off-ramp."
"But there is clearly a risk that both sides may dig in their heels, expecting their opponent to fold first. While China’s economy has proven more resilient in the face of U.S. tariffs than many had feared, there is still significant potential downside from a deeper rift with the U.S."
On Sunday, the U.S. Trade Representative said Washington had reached out to China for a phone call after its rare earths announcement, but Beijing deferred the conversation. China has also hit out at the U.S. over what it described as "double standards," highlighting the Trump administration’s move to put some Chinese firms onto a trade blacklist and impose port fees on ships linked to China.
3. China exports surpass expectations
Meanwhile, China’s export growth rebounded in September, but the specter of reignited trade tensions with the U.S. have muddied the outlook for both job growth and deflation in an economy that relies heavily on sending goods to foreign countries.
Exports from the world’s second largest-economy increased at an annualized pace of 8.3% last month, according to official customs data, well ahead of the 6.0% gain projected by analysts and up from August’s 4.4% rise.
"This resilience shows that China has strengthened trade with the rest of the world amid U.S. protectionism," ING analysts said in a note.
China has raced to rejig its export markets to decrease its reliance on the U.S. in the wake of the trade spat with Washington, a move that has helped to keep China on track to meet its goal of 5% annual growth. Yet the tactic may come under pressure should Trump go ahead with his triple-digit tariff threat.
4. Gold’s new record
Gold prices jumped to fresh record highs on Monday, approaching the $4,100-per-ounce mark, as renewed U.S.-China trade tensions boosted demand for safe-haven assets.
Spot gold rose 1.3% to $4,070.29 per ounce by 02:53 ET, after touching a record $4,078.05 earlier in the session. U.S. gold futures climbed 1.6% to $4,089.45/oz. Silver also hit an all-time high, riding the momentum in precious metals.
Bullion prices spiked after Trump ratcheted up trade tensions on Friday, unsettling financial markets and sending investors pouring into safe-haven assets including gold. The yellow metal is typically viewed as a bastion for investment during times of economic or political uncertainty.
While Trump’s shift in tone has helped to calm some nerves, traders have remained wary of unpredictable policy changes from the White House.
5. Oil bounces after touching five-month lows
Elsewhere, oil prices bounced after slipping to five-month lows in the prior session, reflecting hopes for that the trade tensions between the U.S. and China will eventually die down.
Brent crude futures ralliedby 1.6% to $63.72 per barrel by 03:47 ET and U.S. West Texas Intermediate crude futures added 1.6% to $59.83 a barrel.
The contracts settled lower by 3.82% and 4.24%, respectively, on Friday -- both the lowest levels since May 7. WTI prices are set to settle on Tuesday because much of the U.S. is on a public holiday on Monday.
Analysts also suggested that a fragile ceasefire in Gaza dented oil prices, with an easing of the conflict potentially soothing some worries over supply disruptions through the Middle East. On Monday, Palestinian militant group Hamas released the first batch of living Israeli hostages, as part of the initial phase of a U.S.-brokered agreement designed to bring an end to years of fighting, media reports said.