Overnight Markets And News

Jun E-mini S&Ps (ESM18 +1.19%) this morning are up sharply by +1.23% and European stocks are up +0.49% as concerns eased over a China/U.S. trade war. The WSJ reported that unidentified people with knowledge of the matter said China and the U.S. have quietly started negotiations to improve U.S. access to Chinese markets. The talks are led by U.S. Treasury Secretary Mnuchin and U.S. trade representative Lighthizer and Chinese President Jinping's top economic aid Liu He. On a Sunday news show, Treasury Secretary Mnuchin said he's "cautiously hopeful" that China will reach a deal to avoid tariffs. Asian stocks settled mixed: Japan +0.72%, Hong Kong +0.79%, China -0.60%, Taiwan +0.15%, Australia -0.52%, Singapore -0.26%, South Korea +0.79%, India +1.44%. China's Shanghai Composite fell to a 1-1/2 month low, although closed well above its lows, and Japan's Nikkei Stock Index rebounded from a 5-3/4 month low and closed higher on optimism the U.S. and China can reach an agreement over trade tariffs.

The dollar index (DXY00 -0.23%) is down -0.23% at a 5-week low. EUR/USD (^EURUSD +0.49%) is up +0.50% at a 2-week high. USD/JPY (^USDJPY +0.36%) is up +0.37%.

Jun 10-year T-note prices (ZNM18 -0-050) are down -4.5 ticks.

ECB Governing Council member Weidmann said, "the end of net asset purchases is only the beginning of a monetary-policy normalization process that will take several years, and that's why it's particularly important to start soon." He added that market expectations for the end of bond buying in 2018 and forecasts for the first interest-rate increase in the middle of 2019 are "not unrealistic."

U.S. Stock Preview

Key U.S. news today includes: (1) Feb Chicago Fed national activity index (expected +0.03 to 0.15, Jan -0.02 to 0.12), (2) Mar Dallas Fed manufacturing activity (expected -3.7 to 33.5, Feb +3.8 to 37.2), (3) USDA weekly grain export inspections, (4) New York Fed President William Dudley (voter) speaks to the U.S. Chamber of Commerce in Washington on the future of financial regulation, (5) Treasury auctions $30 billion of 2-year T-notes, (6) Cleveland Fed President Loretta Mester (voter) speaks on monetary policy at Princeton University, (7) Fed Vice Chair Randal Quarles speaks at the Hope Global Forums meeting n Atlanta.

Notable Russell 1000 earnings reports today include: Paychex (consensus $0.63), Red Hat (0.81).

U.S. IPO's scheduled to price today: GreenTree Hospitality Group (GHG).

Equity conferences this week: Scotia Howard Weil Energy Conference on Mon-Tue, Needham & Company Health Care Conference on Tue, Bank of America Merrill Lynch Auto Summit on Wed, Barclays, Chemical ROC Stars Conference on Wed.

Market Comments

Jun S&P 500 E-mini stock futures (ESM18 +1.19%) this morning are up sharply by +32.00 points (+1.23%). Friday's closes: S&P 500 -2.10%, Dow Jones -1.77%, Nasdaq -2.61%. The S&P 500 on Friday fell to a 1-1/2 month low and closed sharply lower on an escalation of a trade war between China and the U.S. after China said it will levy tariffs on $3 billion of U.S. goods in retaliation for U.S. tariffs on steel and aluminum. There was some underlying support from the +1.8% increase in U.S. Feb capital goods new orders nondefense ex-aircraft, stronger than expectations of +0.9%. Energy stocks were supported by the +2.46% rally in crude oil prices to a 1-3/4 month high.

Jun 10-year T-note prices (ZNM18 -0-050) this morning are down -4.5 ticks. Friday's closes: TYM8 +18.00, FVM8 +9.75. Jun 10-year T-notes on Friday climbed to a 1-1/2 month high and closed higher on concern that any escalation of a U.S./China trade war will slow economic growth that could delay or stop additional Fed interest rate hikes. T-notes were also supported by dovish comments from Minneapolis Fed President Kashkari who said, "I don't see any evidence the economy is overheating, and wage growth has been quite modest." T-notes gave up most of their gains on concern that China, the largest holder of U.S. debt, may scale back its Treasury purchases after China's ambassador to the U.S. said "we are looking at all options" when asked if China would consider cutting back on purchases of U.S. Treasuries in retaliation for U.S. tariffs on Chinese goods.

The dollar index (DXY00 -0.23%) this morning is down -0.207 (-0.23%) at a 5-week low. EUR/USD (^EURUSD +0.49%) is up +0.0062 (+0.50%) at a 2-week high and USD/JPY (^USDJPY +0.36%) is up +0.39 (+0.37%). Friday's closes: Dollar Index -0.421 (-0.47%), EUR/USD +0.0051 (+0.41%), USD/JPY -0.54 (-0.41%). The dollar index on Friday closed lower on concern that an escalation of a trade war with China would curb economic growth after China retaliated against the U.S. for its steel-aluminum tariffs by levying tariffs on $3 billion of U.S. goods. USD/JPY fell to a 16-1/2 month low on increased safe-haven demand for the yen as global stocks declined and after Japan Feb national CPI rose +1.5% y/y, the fastest pace of increase in 2-3/4 years, which is hawkish for BOJ monetary policy closer.

May crude oil (CLK18 -0.21%) this morning is down -12 cents (-0.18%) and May gasoline (RBK18 -0.15%) is -0.0029 (-0.14%). Friday's closes: May WTI crude +1.58 (+2.46%), May gasoline +0.0236 (+1.17%). May crude oil and gasoline on Friday closed higher with May crude at a 1-3/4 month high. Crude oil prices were boosted by a weaker dollar and by President Trump's appointment of John Bolton, a known Middle East hawk, as national security adviser, which fueled speculation the Trump administration will take a hardline and reimpose sanctions on Iran that will curb its oil exports and reduce global crude supplies. Crude oil prices were also supported by the increase in the crack spread to a 4-1/4 month high, which gives incentive for refineries to boost their crude purchases to refine the crude into gasoline.

Metals prices this morning are mixed with Apr gold (GCJ18 -0.13%) -1.8 (-0.13%), May silver (SIK18 +0.20%) +0.028 (+0.17%), and May copper (HGK18 -1.50%) -0.043 (-1.44%) at a 3-1/2 month nearest-futures low. Friday's closes: Apr gold +22.5 (+1.70%), May silver +0.195 (+1.19%), May copper -0.0270 (-0.89%). Metals on Friday settled mixed with Apr gold at a 1-month high, May silver at a 1-week high and May copper at a 3-1/2 month low. Metals prices were supported by a weaker dollar and by increased safe-haven demand for precious metals on a possible trade war between China and the U.S. Copper prices fell on concern that an escalation of the trade war between China and the U.S. would curb economic growth and China's copper demand. Copper was also undercut by the rise in weekly Shanghai copper inventories by +10,441 MT to a 11-1/2 month high of 307,435 MT.

Overnight U.S. Stock Movers

Microsoft (MSFT -2.91%) jumped 4% in pre-market trading after Morgan Stanley named the stock a "Top Pick" and raised their price target on it to $130 from $110.

Dollar Tree (DLTR -1.70%) was upgraded to 'Overweight' from 'Neutral' at Piper Jaffray with a price target of $112.

MetLife (MET -3.57%) was upgraded to 'Overweight' from 'Neutral' at Atlantic Equities LLP with a price target of $60.

Marathon Oil (MRO -0.51%) was upgraded to 'Overweight' from 'Neutral' at JPMorgan Chase with a price target of $20.

Jack in the Box (JACK -0.39%) was downgraded to 'Equal-Weight' from 'Overweight' at Morgan Stanley.

Adobe Systems (ADBE -2.49%) was downgraded to 'Market Perform' from 'Market Outperform' at JMP securities.

Gaia (GAIA -3.42%) was rated a new 'Buy' at B Riley FBR with a price target of $23.

Dover (DOV -0.64%) was downgraded to 'Neutral' from 'Overweight' at JPMorgan Chase.

United Technologies (UTX -1.42%) won a $239.7 million contract from the U.S. Navy for production of 137 F135 propulsion systems.

Redmile Group, the largest holder of Alder Biopharmaceuticals (ALDR -0.88%) stock, said it may consider possible changes to ALDR's board and or management, or other alternatives to increase stockholder value.

Dynavax (DVAX unch) received approval from the FDA for manufacturing changes to its HEPLISAV-B pre-filled syringe and the FDA also approved Dynavax's new manufacturing site for the HEPLISAV-B pre-filled syringe.

Plx Pharma (PLXP -16.94%) was downgraded to 'Neutral' from 'Buy' at Janney Montgomery Scott LLC.