Stock Futures Rise on Stimulus Talks, China's Growth

U.S. stock futures rose Monday, pointing to gains for major indexes at the start of the week, as investors assessed the potential for fresh stimulus packages and China's economic recovery.

Futures linked to the S&P 500 advanced 0.7%, suggesting the gauge will rise after the New York opening bell. Contracts tied to the tech-heavy Nasdaq-100 climbed 0.9%.

U.S. stocks eked out muted gains last week as investors reckoned with persistently high Covid-19 cases, uncertainty surrounding the presidential election, and a tug of war over further fiscal stimulus measures from Washington.

Markets have largely written off expectations that a major U.S. government spending package is likely to be approved before Nov. 3. But investors are continuing to monitor the progress of talks between lawmakers and the White House, with the view that any relief offered to households or businesses before the election would be a bonus.

Over the weekend, House Speaker Nancy Pelosi told the White House it had until Tuesday to reach a deal with Democrats. If the deadline passes without a deal, ongoing talks would be increasingly unlikely to produce sweeping relief legislation worth trillions of dollars within the next two weeks, her aide suggested. Mrs. Pelosi and Treasury Secretary Steven Mnuchin spoke Saturday night, but a number of differences remain.

"It does feel like U.S. politicians are getting their heads together in a more constructive way in terms of fiscal stimulus," said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors. A fiscal stimulus package isn't urgently needed, but "if they can get a multipartite agreement across the line before the election, that would be huge."

With Covid-19 continuing to spread, further fiscal stimulus will be necessary to support the economy, said Robert McAdie, chief cross-asset strategist at BNP Paribas.

"Without renewed fiscal stimulus you'll see a new wave of unemployment, and a new wave of delinquencies and defaults, and that will certainly weigh on growth" he said.

Chinese officials said Monday that gross domestic product expanded by 4.9% in the third quarter from a year earlier, putting China's economy back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy. Other economic indicators released Monday offered additional signs of strength: China's headline unemployment figure, the urban surveyed jobless rate, fell to 5.4% in September.

"If you are looking at the consumer numbers, the manufacturing numbers, they're still very strong coming out of China," Mr. Kassam said. "That's starting us off on a positive tone, and we think that's a theme that's going to continue."

Investors in China and Hong Kong had a mixed reaction to the latest economic data, as the 4.9% growth figure for the third quarter fell short of expectations. The Shanghai Composite Index closed down 0.7%, reversing early gains of more than 1%. Hong Kong's Hang Seng Index pared gains to end the day 0.6% higher.

Iris Pang, chief economist for Greater China at ING Bank NV in Hong Kong, said the latest data was quite good and the market has overreacted based simply on the headline growth numbers. "They haven't digested the whole report," she said.

Many of the concerns regarding U.S. political uncertainty have also receded recently, investors said.

"It does look like a contested election is less of a possibility going forward," said Mr. Kassam, while cautioning that the polls and betting markets were wrong four years ago. "The worst outcome of the U.S. election for markets would have been a contested, protracted election."

The U.S. corporate earnings season will pick up pace this week, with Netflix, Tesla and AT&T among the major companies reporting in the coming days.

Shares of Texas shale driller Concho Resources rose 3.3% premarket on news ConocoPhillips would acquire the company in a $9.7 billion all-stock deal.

American Equity Investment Life Holding shares dropped 9.4% in offhours trading. The company on Sunday rejected a takeover offer by Massachusetts Mutual Life Insurance and Athene Holding, and said it instead reached a partnership with Brookfield Asset Management.

Shares of oil-field services company Halliburton fell 1.1% premarket after it reported a third-quarter loss of $17 million, down from a profit of $295 million in the year-earlier quarter. Technology giant International Business Machines will report after the market closes.

Shares in Front Yard Residential jumped 35% after the U.S. Virgin Islands-based real-estate investment trust said it had agreed to be acquired by a group led by investment firm Pretium Partners LLC and funds managed by Ares Management Corp. in a deal worth about $2.4 billion.

"It's going to be all about the guidance, and the guidance has largely been better than expected, certainly in the U.S.," said Andrew Cole, head of multi asset in London at Pictet Asset Management. "Everybody knows earnings this year are going to be pretty horrid from a year-on-year perspective, so when we start to think about earnings, it's increasingly 2021 that matters," he said.

The yield on 10-year Treasury notes ticked up to 0.770%, from 0.743% Friday. The WSJ Dollar Index, which tracks the currency against a basket of others, edged down 0.4%.

The main gauge for U.S. crude-oil futures slid 0.3% to $40.98 a barrel.

Overseas, the Stoxx Europe 600 ticked up 0.1%. Euronext NV, which operates exchanges across Europe, said it had resolved a technical issue that had halted trading in some markets.

--

Chong Koh Ping

in Hong Kong contributed to this article.

Write to Mischa Frankl-Duval at Mischa.Frankl-Duval@wsj.com

By Mischa Frankl-Duval

U.S. stock futures rose Monday, pointing to gains for major indexes at the start of the week, as investors assessed the potential for fresh stimulus packages and China's economic recovery.

Futures linked to the S&P 500 advanced 0.7%, suggesting the gauge will rise after the New York opening bell. Contracts tied to the tech-heavy Nasdaq-100 climbed 0.9%.

U.S. stocks eked out muted gains last week as investors reckoned with persistently high Covid-19 cases, uncertainty surrounding the presidential election, and a tug of war over further fiscal stimulus measures from Washington.

Markets have largely written off expectations that a major U.S. government spending package is likely to be approved before Nov. 3. But investors are continuing to monitor the progress of talks between lawmakers and the White House, with the view that any relief offered to households or businesses before the election would be a bonus.

Over the weekend, House Speaker Nancy Pelosi told the White House it had until Tuesday to reach a deal with Democrats. If the deadline passes without a deal, ongoing talks would be increasingly unlikely to produce sweeping relief legislation worth trillions of dollars within the next two weeks, her aide suggested. Mrs. Pelosi and Treasury Secretary Steven Mnuchin spoke Saturday night, but a number of differences remain.

"It does feel like U.S. politicians are getting their heads together in a more constructive way in terms of fiscal stimulus," said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors. A fiscal stimulus package isn't urgently needed, but "if they can get a multipartite agreement across the line before the election, that would be huge."

With Covid-19 continuing to spread, further fiscal stimulus will be necessary to support the economy, said Robert McAdie, chief cross-asset strategist at BNP Paribas.

"Without renewed fiscal stimulus you'll see a new wave of unemployment, and a new wave of delinquencies and defaults, and that will certainly weigh on growth" he said.

Chinese officials said Monday that gross domestic product expanded by 4.9% in the third quarter from a year earlier, putting China's economy back toward its pre-coronavirus trajectory half a year after the pandemic gutted its economy. Other economic indicators released Monday offered additional signs of strength: China's headline unemployment figure, the urban surveyed jobless rate, fell to 5.4% in September.

"If you are looking at the consumer numbers, the manufacturing numbers, they're still very strong coming out of China," Mr. Kassam said. "That's starting us off on a positive tone, and we think that's a theme that's going to continue."

Investors in China and Hong Kong had a mixed reaction to the latest economic data, as the 4.9% growth figure for the third quarter fell short of expectations. The Shanghai Composite Index closed down 0.7%, reversing early gains of more than 1%. Hong Kong's Hang Seng Index pared gains to end the day 0.6% higher.

Iris Pang, chief economist for Greater China at ING Bank NV in Hong Kong, said the latest data was quite good and the market has overreacted based simply on the headline growth numbers. "They haven't digested the whole report," she said.

Many of the concerns regarding U.S. political uncertainty have also receded recently, investors said.

"It does look like a contested election is less of a possibility going forward," said Mr. Kassam, while cautioning that the polls and betting markets were wrong four years ago. "The worst outcome of the U.S. election for markets would have been a contested, protracted election."

The U.S. corporate earnings season will pick up pace this week, with Netflix, Tesla and AT&T among the major companies reporting in the coming days.

Shares of Texas shale driller Concho Resources rose 2.7% premarket on news ConocoPhillips would acquire the company in a $9.7 billion all-stock deal.

American Equity Investment Life Holding shares dropped 9.4% in offhours trading. The company on Sunday rejected a takeover offer by Massachusetts Mutual Life Insurance and Athene Holding, and said it instead reached a partnership with Brookfield Asset Management.

Shares of oil-field services company Halliburton fell 1% premarket after it reported a third-quarter loss of $17 million, down from a profit of $295 million in the year-earlier quarter. Technology giant International Business Machines will report after the market closes.

Shares in Front Yard Residential jumped 35% after the U.S. Virgin Islands-based real-estate investment trust said it had agreed to be acquired by a group led by investment firm Pretium Partners LLC and funds managed by Ares Management Corp. in a deal worth about $2.4 billion.

"It's going to be all about the guidance, and the guidance has largely been better than expected, certainly in the U.S.," said Andrew Cole, head of multi asset in London at Pictet Asset Management. "Everybody knows earnings this year are going to be pretty horrid from a year-on-year perspective, so when we start to think about earnings, it's increasingly 2021 that matters," he said.

The yield on 10-year Treasury notes ticked up to 0.766%, from 0.743% Friday. The WSJ Dollar Index, which tracks the currency against a basket of others, edged down 0.4%.

The main gauge for U.S. crude-oil futures slid 0.2% to $41.02 a barrel.

Overseas, the Stoxx Europe 600 edged down 0.1%. Euronext NV, which operates exchanges across Europe, said it had resolved a technical issue that had halted trading in some markets.

--

Chong Koh Ping

contributed to this article.

Write to Mischa Frankl-Duval at Mischa.Frankl-Duval@wsj.com


  (END) Dow Jones Newswires
  10-19-20 0850ET
  Copyright (c) 2020 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.