Overnight Markets And News

Jun E-mini S&Ps (ESM18 +0.56%) this morning are up +0.56% as U.S. and China trade war risks receded. U.S. Treasury Secretary Mnuchin said Sunday that "We're putting the trade war on hold." A joint statement from the May 17 and 18 trade talks between the U.S. and China said both sides agreed on meaningful increases in U.S. agriculture and energy exports and the U.S. will send a team to China to work out the details. Both sides attach paramount importance to intellectual property protections and China will advance relevant amendments to its laws and regulations in this area, including the Patent Law. European stocks are up +0.19%, although gains were limited on Italian political risks as the populist coalition proposes to issue short-term credit notes that threaten to increase borrowing in one of Europe's most indebted economies. EUR/USD (^EURUSD -0.12%) tumbled to a 6-month low and the Italian 2-year bond yield rose to a near 3-year high of 0.23% on concern about the Italian government coalition's fiscal plans. Asian stocks settled mostly higher: Japan +0.31%, Hong Kong +0.60%, China +0.64%, Taiwan +1.25%, Australia -0.05%, Singapore +0.54%, South Korea +0.28%, India -0.67%. Asian markets rallied as China's Shanghai Composite climbed to a 1-1/4 month high and Japan's Nikkei Stock Index rose to a 3-1/2 month high after U.S. Treasury Secretary Mnuchin said the U.S. won't impose tariffs on China for now and China proposed to "significantly increase purchases" of U.S. goods. The jump in USD/JPY to a 4-month high also fueled gains in Japanese exporter stocks as that increases exporters' earnings prospects.

The dollar index (DXY00 +0.03%) is up +0.28% at a 5-1/4 month high on news of a truce in the trade war between the U.S. and China. EUR/USD (^EURUSD -0.12%) is down -0.20% at a 6-month low on concern about the Italian coalition’s fiscal plans. USD/JPY (^USDJPY +0.48%) is up +0.38% at a 4-month high.

Jun 10-year T-note prices (ZNM18 -0-020) are down -4 ticks.

ECB Governing Council member Nowotny said the Eurozone economy isn't overheating and inflation won't pick up dramatically, but proposals from parties forming a government in Italy are "creating a lot of nervousness, and he hopes the actual policies will be "much wiser" than the proposals.

The Japan Apr trade balance shrank to a surplus of 626.0 billion yen, wider than expectations of 440.0 billion yen. Apr exports rose +7.8% y/y, weaker than expectations of +8.7% y/y. Apr imports rose +5.9% y/y, weaker than expectations of +9.8% y/y.

U.S. Stock Preview

Key U.S. news today includes: (1) Apr Chicago Fed national activity index (expected +0.38 to 0.48, Mar -0.88 to 0.10), (2) USDA weekly grain export inspections, (3) Atlanta Fed President Raphael Bostic (voter) speaks to the Atlanta Economic Club on “Welfare Economic: Trade & a Review of Principles,” (4) Philadelphia Fed President Patrick Harker (non-voter) speaks at the Chief Executives Organization’s CEO Financial Seminar, (5) USDA weekly Crop Progress, (6) Minneapolis Fed President Neel Kashkari speaks at a moderated Q&A at an event in Escanaba, MI.

Notable Russell 1000 earnings reports today include: Nordson (consensus $1.43).

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

Equity conferences this week: American Gas Association Financial Forum on Mon, Electrical Products Group Spring Conference on Mon, JP Morgan Energy Bus Tour on Mon-Tue, UBS Global Healthcare and Life Sciences Conference on Mon-Wed, Electrical Products Group Conference on Mon-Wed, Barclays High Yield Bond & Syndicated Loan Conference on Tue, JPMorgan Technology, Media and Telecoms CEO Conference on Tue-Wed, Wolfe Research Global Transportation Conference on Tue-Wed, UBS Global Oil & Gas Conference on Tue-Thu, Berenberg USA Conference on Tue-Thu, Citi Consumer Staples Conference on Wed, Morgan Stanley Chem Tech Day on Wed, Advances in Immuno-Oncology Congress on Thu, Handelsbanken Nordic Mid Small Cap Seminar on Thu, HSBC Luxury Goods Conference on Thu, Jefferies Global Automotive Aftermarket Investor Conference on Thu, Wells Fargo Financial Services Investor Forum on Thu.

Market Comments

June S&P 500 E-minis (ESM18 +0.56%) this morning are up +0.56%. The S&P 500 on Friday closed lower: S&P 500 -0.09%, Dow Jones -0.22%, Nasdaq -0.41%. Bearish factors included (1) negative carry-over from a slide in European stocks on increased Italian political risks as the yield on the 10-year Italy government bond jumped to a 10-month high of 2.22% after the Five Star Movement and the League reached an accord that demands a review of EU budget rules, and (2) uncertainty surrounding the U.S.-China trade talks after A Chinese foreign ministry official denied that China had offered to cut its trade surplus with the U.S. by $200 billion. Bullish factors included (1) upbeat comments from Cleveland Fed President Mester who said, "the U.S. economy is near both Fed monetary goals of maximum employment and price stability, and the outlook is one of the most favorable we have seen in a long time," and (2) reduced interest rate concerns after 10-year T-note yield declined. 

June 10-year T-notes (ZNM18 -0-020) this morning are down -4 ticks. Jun 10-year T-notes on Friday closed higher: TYM8 +10.50, FVM8 +5.75. Bullish factors included (1) carry-over support from a rally in German 10-year bunds to a 4-session high, and (2) weakness in stocks, which boosted the safe-haven demand for T-notes.

The dollar index (DXY00 +0.03%) this morning is up +0.265 (+0.28%) at a 5-1/4 month high. EUR/USD (^EURUSD-0.12%) is down -0.0023 (-0.20%) at a 6-month low. USD/JPY (^USDJPY +0.48%) is up +0.53 (+0.48%) at a 4-month high. The dollar index on Friday climbed to a 5-month high and closed higher: Dollar Index +0.168 (+0.18%), EUR/USD -0.0023 (-0.19%), USD/JPY +0.01 (+0.01%). Bullish factors included (1) upbeat comments from Cleveland Fed Mester who said the outlook for the U.S. economy "is one of the most favorable we have seen in a long time," and (2) weakness in EUR/USD which tumbled to a 5-month low on increased Italian political risks after the Five Star Movement and the League reached an accord that demands a review of EU budget rules and pledges to roll-back pension reforms that raised the retirement age, which would violate EU austerity rules.

Metals prices this morning are mixed with Jun gold (GCM18 -0.52%) -8.2 (-0.64%) at a 4-3/4 month low, Jul silver (SIN18 -0.33%) -0.100 (-0.61%), and Jul copper (HGN18 +1.19%) +0.039 (+1.26%). Metals on Friday settled mixed: Jun gold +1.90 (+0.15%), Jul silver -0.026 (-0.16%), Jul copper -0.0255 (-0.83%). Bearish factor included (1) the increase in the dollar index to a 5-month high, and (2) the +1,275 MT increase in LME copper inventories to a 1-week high of 301.475 MT. Gold closed higher on fund buying due to increase Italian political risks as long gold positions in ETFs rose to a 5-year high.

Jun WTI crude oil prices (CLM18 +0.15%) this morning are up +20 cents (+0.28%) and Jun gasoline (RBM18 -0.10%) is +0.0044 (+0.20%). Jun crude oil and gasoline on Friday closed lower: Jun crude -0.21 (-0.29%), Jun gasoline 0.0098 (-0.44%). Bearish factors included (1) the rally in the dollar index to a 5-month high, and (2) comments from Saudi Energy Minister Khalid Al-Falih who said Saudi Arabia and other producers will ensure crude supplies are sufficient to offset any shortfalls and maintain reasonable prices.

Overnight U.S. Stock Movers

Knight-Swift Transportations Holdings (KNX +2.21%) was upgraded to 'Buy' from 'Hold' at Stifel with a price target of $48.

Welltower (WELL +0.63%) was upgraded to 'Outperform' from 'Market Perform' at Raymond James with a price target of $60.

Dillards (DDS +1.10%) was upgraded to 'Buy' from 'Underperform' at Bank of America/Merrill Lynch with a price target of $89.

Campbell Soup (CPB -12.37%) was downgraded to 'Underperform' from 'Neutral' at Bank of America/Merrill Lynch with a price target of $31.

nLight (LASR -0.07%) was rated a new 'Buy' at D.A. Davidson with a price target of $40.

Hostess Brands (TWNK -1.09%) was rated a new 'Buy' at Berenberg with a price target of $15.

The Janssen Pharmaceutical Company of Johnson & Johnson (JNJ +0.31%) said a Phase 3 study of its Erleada showed that treatment with the drug significantly cut the risk of prostate specific antigen progression in patients with non-metastatic castration-resistant prostate cancer.

United Technologies (UTX +0.47%) agreed to sell Taylor Co., a business that specializes in ice-cream dispensing equipment, to Middleby Corp for $1 billion.

Editas Medicine (EDIT -8.24%) may move higher first thing this morning after a pre-clinical study showed the company's gene therapy EDIT-101 was well tolerated with no adverse side-effects in treatment in patients with Leber Congenital Amaurosis type 10.

Rocket Pharmaceuticals (RCKT -0.15%) climbed 3% in after-hours trading after it reported data from its gene therapy RP-L102 for Fanconi Anemia showed continued improvement in engraftment among five patients in a Phase 1/2 trial.

Geron (GERN +4.44%) fell almost 3% in after-hours trading after it entered into an at market issuance sales agreement with B. Riley where it can sell shares of its common stock of up to $100 million from time to time.