US futures edge higher on trade truce hopes

NEW YORK: U.S. equity futures edged higher on Thursday following a report that the United States and China had agreed to a tentative truce in their trade dispute before a G20 summit this weekend, but gains were tempered by Boeing shares after more 737 MAX woes.

Washington and Beijing were laying out an agreement that would help avert the next round of tariffs on an additional $300 billion of Chinese imports, the South China Morning Post reported, citing sources.

Earlier, President Donald Trump said a trade deal with his Chinese counterpart, Xi Jinping, was possible this weekend, though he was prepared to impose tariffs on virtually all remaining Chinese imports if talks fail.

Semiconductor companies, which have a sizable revenue exposure to China, were trading higher, with Advanced Micro Devices Inc (AMD.O), Nvidia Corp (NVDA.O) and Intel Corp (INTC.O) up between 0.5% and 1.7%.

Boeing Co (BA.N) fell 3.1% and was the biggest decliner among the 24 Dow components trading premarket, after Reuters reported that the U.S. Federal Aviation Administration identified a new flaw in the planemaker’s grounded 737 MAX jets.

At 7:08 a.m. ET, Dow e-minis 1YMcv1 were down 7 points, or 0.03%. S&P 500 e-minis EScv1 were up 5.75 points, or 0.2% and Nasdaq 100 e-minis NQcv1 were up 22.5 points, or 0.29%.

Investors are hoping for a resolution of the trade war, which has rattled investors who have ditched shares for the safety of bonds and gold this year and pushed the Federal Reserve to signal an interest rate cut as soon as next month.

On the data front, the U.S. Commerce Department is scheduled to report economy expanded at a 3.1% annualized rate in its third reading of first-quarter GDP growth.

The Dow Jones Industrial Average DJIA, -0.04% fell 11.4 points, or less than 0.1%, to 26,536.82, but had been as high as 26,669, while the S&P 500 SPX, -0.12%  fell 3.6 points, or 0.1%, to 2,913.78, representing a fourth straight decline for the index, its longest string of loses since a similar downturn ended May 9, FactSet data show. The Nasdaq Composite Index COMP, +0.32% rose 25.2 points, or about 0.3%, to 7,909.97, halting a three-session stumble.

Comments from U.S. Treasury Secretary Steven Mnuchin suggesting that a Sino-American trade resolution had been near in an earlier round of talks, provided an early lift to markets. “We were about 90% of the way there (with a deal) and I think there’s a path to complete this,” he told the financial network in Bahrain.

The U.S. Treasury Secretary said he was “hopeful” that a deal could be struck as the market awaits a sideline conversation between President Donald Trump and Chinese President Xi Jinping at the Group of 20 gathering in Osaka, Japan, which kicks off on Friday.

Optimism over the prospects for a trade war detente tempered during the session, however.

“I am not optimistic of anything of significance to be achieved for the meetings in Japan this week,” said Mariann Montagne, a portfolio manager at Gradient Investments, in a telephone interview.

“Mnuchin or members of his team have used that phrase several times over the past several months,” she told MarketWatch. “I think people are getting too excited.”

In April, Mnuchin said U.S.-China trade talks were in the “final laps.

Separately, President Trump, appearing on Fox Business said that he was happy to collect China tariffs if talks broke down.

Concerns about escalating trade tensions between China and the U.S., the world’s largest economies, have fed a sense of rising uncertainty about the health of the global economy, at least partly contributing to central banks across the world signaling a willingness to reinstitute a fresh wave of economic stimulus.

“Certainly, when we came in pre-open, futures were higher on the Mnuchin comments,” said Sahak Manuelian, an equities trader at Wedbush Securities, while noting that those gains were short lived.

Earlier, equity markets suffered one of the worst declines in about a month, led by a selloff in trade-sensitive technology shares.

“It’s a bit of wavering ahead of the G-20,” said Jeff Kleintop, chief global investment strategist at Charles Schwab, in an interview. “The markets have priced in a delay to the implementation of the next round of tariffs, through next month, on $300 billion of Chinese goods.”

But Kleintop also cautioned that stocks, near all-time highs, may be seeing an overabundance of confidence.

“If it’s trade or another factor, the market does feel vulnerable to a setback,” Kleintop said.

Tuesday’s slump in stocks came after Federal Reserve Chairman Jerome Powell, speaking at the Council on Foreign Relations in New York, signaled that an interest-rate cut in July isn’t a done deal, and St. Louis Fed President James Bullard said he isn’t advocating for an aggressive cut of 50 basis point in federal-funds rates when the Fed meets next month.