◊ Stock Markets Today ◊
• U.S. stock futures gain
• Treasury yields edge up
• Tariffs to be implemented over the weekend
Global stocks extended their rally on the final trading day of the month on optimism around U.S.-China trade relations, despite impending new tariffs. The Stoxx Europe 600 opened up 0.8%, with the U.K.’s FTSE 0.3% higher and the German DAX up 1%.
U.S. futures for the S&P 500 were up 0.6%. Futures don’t necessarily predict moves after the opening bell.
Stocks have drifted higher since China said Thursday that its officials remained in communication with the U.S. over possible talks in September. The Dow Jones Industrial Average and the S&P 500 both rose 1.3% Thursday.
Despite the positivity among investors, both the U.S. and China are set to impose new tariffs each other’s goods on Sunday.
Oliver Jones, a senior markets economist at Capital Economics, said given the August political volatility, it is hard to know what the reaction will be if the tariffs go into effect.
“It’s really hard to pin down exactly what’s priced in,” he said. The gains in Europe also came after weak German retail sales for July reinforced expectations for a strong stimulus package from the European Central Bank, said Michael Hewson, chief market analyst at CMC Markets. Retail sales fell 2.2%, more than analysts had expected.
Mr. Hewson said he expects gains in the equities market to be temporary.
Ian Williams, an economics and strategy research analyst at Peel Hunt, said in addition to the positive reaction from investors to recent comments from the U.S. and Chinese governments, some of the strength in stocks reflected end-of-month positioning. The Stoxx Europe 600 has fallen 1.6% this month to date.
Looking past volatility driven by political events, Mr. Williams said investors will be closely watching data on manufacturing activity. “Probably next week is going to be more important,” he said.
Government bond yields edged higher, with the U.S. 10-year Treasury at 1.527%, from 1.520% Thursday. The German 10-year bund was yielding minus 0.700% on Friday. Bond yields and prices move in opposite directions.
The dollar also strengthened on the trade news. The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, held gains from Thursday, putting it at its highest level since March 2017.
Following the U.S. stock rally Thursday, most Asian indexes outside of China advanced, with Japan’s Nikkei 225 up 1.2% and South Korea’s Kospi up 1.8%. The Shanghai Composite edged down 0.2% and stocks in Shenzhen slipped 0.7%.
Hong Kong’s Hang Seng Index edged up 0.1% following the cancelation of a weekend demonstration, but remained on pace for one of its worst monthly drops in years, down 7% in August.
Hong Kong stocks have been weighed by intensifying protests that have hurt the local economy and prompted concerns about a looming recession. In comparison, benchmark stock indexes in mainland China, South Korea and Japan are down 1-4% in August.
The U.S. Commerce Department will release figures on July personal income and spending later Friday. In June, Americans’ spending moderated slightly but remained strong, a sign that high consumer confidence and low unemployment fueled economic growth. Incomes also rose. Economists surveyed by The Wall Street Journal forecast personal income growth of 0.3% in July and consumer spending gains of 0.5%.
Canada will also release its June gross domestic product figures, which track broad activity in goods and services in the economy. In May, the measure climbed 0.2% from the prior month, marking a slowdown.
In commodities, Brent crude oil fell 0.3% to $60.33 a barrel.