Wall Street Set for Higher Open as Huawei Purchases are Extended – 19 August 2019

Just minutes before the opening bell on Wall Street, all three major benchmark indexes are looking towards a higher open, boosted by a rebound in U.S. Treasury yields and the announcement that Chinese tech giant Huawei will be allowed to purchase U.S. supplies for another 90 days. Benchmark 10-year Treasury yields soared to nearly 1.61 percent on Monday, from 1.54 percent, after falling to three-year lows last week and inverting briefly in a move that spurred recession fears and a steep selloff on Wall Street.

The Dow Jones Industrial Average is looking to jump over 300 points on the open, and futures for the S&P 500 and the NASDAQ were also markedly higher.

Optimism Abounds

Though U.S. President Donald Trump said over the weekend that he’s not quite ready for a trade deal with China, he did tweet his own optimism, which, if taken at face value, could be a positive sign for the markets. Specifically, Trump tweeted “We are doing very well with China, and talking!The granting of an extension for Huawei to purchase American-made supplies for their telecommunications company is a sign that there is room for negotiation between the two economic superpowers. Indeed, President Trump will need to show that he is willing to close a trade deal that will anchor the U.S. economy as he bids for re-election and wants to show his constituents his economic and political prowess. Luckily for Trump, turmoil in Europe has made U.S. assets more attractive to traders as they flee from the Eurozone. Still, a trade agreement with China will be necessary in order to build confidence in both the U.S. economy and Trump’s presidency.

Futures for chip makers soared in the pre-market hours after the extension was announced, as did bank stocks, on news of the Treasury yield jump. Stocks in Asia closed solidly higher, with China’s benchmarks seeing the largest gains. The Shenzhen Composite closed up 3.05 percent and the Shanghai Composite ended 2.10 percent higher. Japan’s Nikkei 225 saw gains of 0.71 percent on Monday, and South Korea’s Kopsi closed 0.66 percent higher. Hong Kong’s Hang Seng Index jumped 2.17 percent after struggling lately in the wake of political unrest in the region.

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