Futures Soar To New Record High On US-China Deal Optimism
US equity futures are higher after progress was made by US and Chinese trade negotiators, with a framework in place ahead to provide a basis for the upcoming Trump-Xi meeting on Thursday. As of 8:00am ET, S&P 500 futures rise 0.9% to a new all time high, having closed last week at a record, with Nasdaq and Russell outperforming as the framework deal is boosting Semis / Mag7 while rare earth plays are under pressure. AMD, AVGO, and NVDA are +2% with all Mag7 higher. Cyclicals are outpacing Defensives with parts of Staples in the red. Bond yields are up 2bp across the curve, pushing the 10Y to 4.02%. The dollar weakened against all major peers except the Swiss franc. Commodities are mixed as both energy and precious metals slide, though base metals are higher and Ags are mostly higher. Copper, a bellwether for global growth, neared an all-time high. Earnings and the Fed are the focus this week with ~44% of SPX market cap reporting this week and the Fed likely to cut by 25bps and potentially to halt QT.
In premarket trading, Magnificent 7 stocks are all higher (Nvidia +2.4%, Amazon +1.8%, Alphabet +2%, Tesla +1.3%, Meta +1.3%, Microsoft +1.2%, Apple +0.8%)
- US stocks with significant exposure to Argentina are rallying after President Javier Milei posted a strong showing in legislative elections, soothing worries that his economic plans would stall.
- US-listed rare earth stocks fell after US Treasury Secretary Scott Bessent said on Sunday that he believed China would delay its rare earth curbs for a year. Rare earth export restrictions were expected to impact supply.
- Avidity Biosciences (RNA) soars 43% after Novartis agreed to buy the biotechnology company in a deal valued at $12 billion. Shares in peer Dyne Therapeutics (DYN) jump 36%.
- BridgeBio Pharma (BBIO) climbs 10% after reporting positive topline results from its Phase 3 pivotal study of BBP-418 in individuals living with limb-girdle muscular dystrophy type 2I/R9.
- Cadence Bank (CADE) rises 2% after agreeing to be bought by Huntington Bancshares Inc. (HBAN) in an all-stock transaction that values Cadence at $7.4 billion. Shares of Huntington are down 4%.
- Essential Utilities Inc. (WTRG) climbs 1.9% after American Water Works Co. agreed to buy the company in an all-stock deal valued at about $12 billion
- GameStop (GME) rises 7% after the White House’s Rapid Response 47 account reposted a statement from the company on X that declared the so-called “console wars” over.
- Grindr (GRND) is up 2% and set to extend Friday’s 19% rally after the dating app confirmed the special committee of its board received a non-binding, unsolicited take-private proposal from large shareholders Ray Zage and James Lu for $18 per share in cash.
- Keurig Dr Pepper Inc. (KDP) gains 6% after raising its full-year net sales outlook, as focus turns to its acquisition of JDE Peet’s NV.
- Zenas Biopharma (ZBIO) soars 56% after the drug developer said a mid-stage trial of its investigative therapy for multiple sclerosis met its primary endpoint.
In corporate news, Novartis agreed to buy Avidity Biosciences in a $12 billion deal. Boeing factory workers in St. Louis narrowly rejected a new five-year contract that would boost wages by an average of 24%, extending a nearly three-month strike. Newmont is set to extend Friday’s losses after the company is said to be is studying a potential deal to gain control of Canadian rival Barrick Mining’s prized Nevada gold assets.
S&P 500 futures traded in fresh record territory after US and Chinese negotiators said they’d reached agreements on issues spanning tariffs, shipping fees, fentanyl and export controls ahead of a meeting between Trump and Xi Jinping later this week. Bloomberg Economics’ Chief Asia Economist Chang Shu expects leaders to approve the deal, but whether it will bring lasting relief to markets is less clear — “the new reality for US-China ties appears to be one of frequent ruptures and short-term fixes.”
“The shift of attention to the negotiations with China is causing the markets to open higher, but only a positive outcome will be sustainable,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM. “This week could be crucial for the course of the rest of the year, with the greatest focus on the Federal Reserve’s wording regarding monetary policy.”
Easing trade tensions between the world’s largest economies are giving investors fresh confidence to extend equities’ rally from April lows, when markets slumped as Trump moved to rewrite global trade rules. That advance faces key tests this week, with the Fed expected to cut interest rates and earnings from AI-heavyweights set to offer clues on profit durability.
“This looks like a win on optics for both sides — the US tempers inflation and supply-chain risks tied to rare earths and electronics, while China avoids sweeping tariffs and keeps its export channels open,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “But until the leaders’ summit signs off, it’s a truce extension, not a breakthrough.”
Elsewhere, Trump announced an additional 10% in tariffs on Canada in response to an advertisement by the province of Ontario that’s critical of the levies. Trump also hailed a “big win” for Javier Milei after his party’s comeback victory in Argentina’s midterm elections, which came after a series of unorthodox steps by the US aimed at stabilizing Argentine assets.
“Fears around the Trump–Xi summit are dissipating, with the tone turning more conciliatory and Bessent suggesting a 100% tariff scenario is practically off the table,” said Susana Cruz, strategist at Panmure Liberum. “Cyclical sectors are likely to benefit the most.”
Besides key trade events, we also have a huge week of tech earnings on deck, including results from Microsoft, Alphabet, Meta Platforms, Amazon.com and Apple. Investors will be seeking color on AI spending plans — and when companies will see returns on their huge investments. Out of the 145 S&P 500 companies that have reported so far in the earnings season, 84% have managed to beat analyst forecasts, while 14% have missed.
Also on the radar is a slew of central bank policy meetings this week. The Fed is widely expected to deliver a second straight rate cut — though eyes will be on deepening divisions between policymakers. Meanwhile, Trump said he expects to make a decision on the next Fed Chair by the end of the year as Treasury Secretary Scott Bessent confirmed the names of five finalists to succeed Powell.
Equity analysts are expected to broaden their earnings revisions to more stocks toward the end of the year and into 2026, according to Morgan Stanley. The third-quarter earnings season has proved stronger than expected so far and could deliver results beyond what analysts expected prior to the tariff turmoil in April, Deutsche Bank strategists said. If beats continue at current rates, y/y earnings growth for the S&P 500 is on track to pick up to 13.2% in 3Q from 9.3% in 2Q, they said.
The US market euphoria hasn’t quite translated for European stocks, with the Stoxx 600 only rising 0.1% on a drag from France and the UK, and a slide in Switzerland. Denmark’s Sydbank surges on a surprise tie-up with two local rivals, and Porsche rises after it reported earnings on Friday after market close. Goodwin shares jump after it said it expects annual trading profit before tax to double. Here are the biggest movers Monday:
- Sydbank gains as much as 7.4%, the most since June, after the Danish lender announced it would buy and merge two of its rivals, Arbejdernes Landsbank and Vestjysk Bank
- Porsche shares rise as much as 4.4% to their highest intraday level since May after posting its latest earnings after market close on Friday. Analysts said the release was consistent with the September profit warning
- Goodwin shares jumped as much as 33%, climbing to a record high, after the engineering company said it expects annual trading profit before tax to double from the prior year and announced a special interim dividend
- Beijer Alma gains as much as 5.3%, extending Friday’s 8.5% earnings-triggered gains, after Handelsbanken upgraded its view on the Swedish industrial components group to buy, saying the company is making “significant” progress
- Galp Energia shares rise as much as 3%, hitting a nine-month high, after the oil and gas firm reported adjusted net income that blew past estimates. Management said the company is well positioned to surpass its current guidance
- Sika falls as much as 1.9% after Bank of America resumed coverage of the chemicals group with an underperform rating after the company’s disappointing 3Q earnings on Friday. Meanwhile, Oddo BHF downgraded its view to neutral
Earlier in the session, Asian stock benchmarks climbed to a fresh record after the US and China came to terms on a range of contentious points, setting the table for a finalized trade deal. The MSCI Asia Pacific Index gained 1.5%, with TSMC and Tencent among the biggest boosts. South Korea’s Kospi jumped more than 2.5% to a new all-time high, helped by chipmaker shares, while Japan’s Topix reached record levels amid strong public support for newly appointed Prime Minister Sanae Takaichi. Benchmarks in Hong Kong and mainland China rose about 1% each, as trade tensions between the world’s largest economies that rattled investors appeared set to ease. Trade egotiators announced Sunday that they’d struck agreements on issues from tariffs to shipping fees, fentanyl and export controls, ahead of Thursday’s planned meeting between Donald Trump and Xi Jinping. Thailand’s main equity gauge rose nearly 1.5% after the nation reached an agreement with Cambodia to manage a border dispute. Stocks declined in Indonesia, the Philippines and Vietnam.
In FX, Bloomberg Dollar Spot Index down 0.1%, with Aussie dollar outperforming on a combination of trade optimism and hawkish comments from RBA Governor Bullock.
In rates, treasury futures hold small losses after gapping lower at the Asian open as prospect of a US-China trade agreement stokes risk appetite, lifting stock futures. Rates market also faces pressure from two- and five-year note auctions slated for Monday, an accelerated schedule enabling supply cycle to conclude before Fed rate decision Wednesday. US yields are 2bp-3bp cheaper across the curve with 10-year around 4.03%, lagging bunds and gilts in the sector by about 1bp and 2bp respectively; curve spreads are little changed. German business confidence hit the highest since 2022, while French markets are digesting Moody’s turning negative on its debt. Monday’s auctions include $69 billion 2-year at 11:30am and $70 billion 5-year at 1pm; cycle ends Tuesday with $44 billion 7-year sale. WI 2-year yield near 3.50% is ~7bp richer than last month’s, which stopped through by 0.1bp; WI 5-year near 3.64% is also ~7bp richer than previous
In commodities, oil reverses an earlier rise and Brent slides well below $66/barrel. Copper rising but short of a record high. Gold falling, down by $73 to $4,040/oz.
The US economic calendar calendar includes October Dallas Fed manufacturing activity at 10:30am; September durable goods orders slated for 8:30am face postponement due to government shutdown.
Market Snapshot
- S&P 500 mini +0.8%
- Nasdaq 100 mini +1.1%
- Russell 2000 mini +1%
- Stoxx Europe 600 little changed
- DAX little changed
- CAC 40 -0.2%
- 10-year Treasury yield +2 basis points at 4.02%
- VIX -0.6 points at 15.74
- Bloomberg Dollar Index little changed at 1211.98
- euro little changed at $1.1634
- WTI crude -1% at $60.91/barrel
Top Overnight News
- Chinese and US trade negotiators struck a slew of agreements on issues spanning tariffs and shipping fees to fentanyl and export controls. Donald Trump said he’ll have a great talk with Xi Jinping later this week as his visit to Asia continued. BBG
- Argentine President Milei’s libertarian party has won a big victory in midterm legislative elections, giving his free-market reform drive fresh impetus after a financial market crisis threatened to derail it. Milei’s La Libertad Avanza party garnered 40.7% against 31.7% for the Peronist opposition alliance with 98% of the vote counted. FT
- President Donald Trump said a decision on the next Federal Reserve chair might be made by the end of the year. The pool of candidates has been narrowed to five, including Trump's aide Kevin Hassett, former Fed Governor Kevin Warsh, current Fed Governor Christopher Waller, Fed Vice Chair for Supervision Michelle Bowman and BlackRock executive Rick Rieder. RTRS
- American employers are increasingly making the calculation that they can keep the size of their teams flat—or shrink through layoffs—without harming their businesses. Part of that thinking is the belief that artificial intelligence will be used to pick up some of the slack and automate more processes. WSJ
- Mark Carney said Canada is ready to resume talks, but Trump ruled out meeting him for a while. Brazil’s Lula da Silva said he had a “surprisingly good” meeting with the US president, and predicted a “definitive solution” within days. BBG
- Apartment rents nationally are advancing at their slowest pace in years, thanks to the glut of new units that has taken longer than expected to absorb. More recently, job concerns among young people are posing a new threat to the rental market. The U.S. unemployment rate for people aged 20 to 24 was 9.2% in August, more than double the overall rate. WSJ
- China’s industrial profits rose sharply in September, extending momentum from a stronger-than-expected increase in August. Industrial profits rose 21.6% from a year earlier in September, following a 20.4% rise in August that ended a three-month run of declines. WSJ
- South Korea’s President Lee Jae Myung warned its property market is a bubble that’s about to burst as he backed the central bank decision to hold rates.BBG
- French lawmakers didn’t vote on a Socialist proposal for a wealth tax Saturday, delaying a possible compromise in a budget debate. French assets wavered after Moody’s cut the country’s credit outlook to negative. BBG
- After 2 straight weeks of selling, HFs reversed course and net bought US equities this week, driven by short covers in Macro Products and to a lesser extent long buys in Single Stocks – nearly all of the ETF shorts raised last week (+6.1%) were covered this week (-5.9%). GS PB
- Fed proposed changes to boost bank stress test transparency on Friday, with the Fed to disclose and solicit feedback on stress test models and scenarios for the first time under the new proposal. Fed Vice Chair for Supervision Bowman said the changes would improve bank capital planning, while Fed's Barr objected to the proposed changes and warned that it would weaken the test and lower bank capital.
Trade/Tariffs
- US President Trump said he expects a very fair meeting with Chinese President Xi and he is optimistic about a China deal, while he said he will do some good business with Chinese President Xi and that he has a lot to talk about with Xi.
- US President Trump said they might sign a final deal on TikTok on Thursday; received provision approval from Chinese President Xi.
- Bessent said overall inflation has come down since President Trump took office and he is confident that inflation will fall further towards the Fed’s 2% target, while Bessent also said that the government shutdown is starting to eat into the muscle of the US economy.
- US Treasury Secretary Bessent said China is ready to make a trade deal and that they have a framework for Trump-Xi talks, while he added that US President Trump and Chinese President Xi will make the final decisions. Bessent separately commented that the tariffs increase on China was averted and that China agreed to delay a new rare earths export licensing regime for a year. Bessent also stated that he expects the Chinese to be making substantial purchases of US soybeans again soon and that US soybean farmers will feel good about coming soybean seasons for several years when the Trump-Xi trade deal is announced, as well as noted that the details of the TikTok deal are ironed out with Trump and Xi able to consummate that transaction in South Korea on Thursday.
- Transportation Secretary Duffy warned that travellers will face more flight delays and cancellations in the coming weeks amid the continuing shutdown: Bloomberg.
- China’s top trade negotiator Li said they reached a consensus with the US and talked about tariffs and export controls, while he added they will enhance communication with the US and talked about 301 port fees, trade expansion and fentanyl.
- Chinese Vice Premier He said they should jointly implement the consensus reached with the US, while he added that China and the US should find ways to properly address each other’s concerns through equal dialogue and consultation.
- USTR said on Friday that they initiated a trade investigation of China's implementation of the Phase One agreement with the US. It was also reported that China’s embassy to the US said regarding the USTR investigation that China opposes false accusations related to investigation measures and that US actions have done serious damage to US-China ties as well as economic and trade relations, while it urged the US to promptly correct wrong practices.
- Chinese Premier Li met with European Council President Costa and said China is willing to work with the EU to keep bilateral relations on the right track, according to Xinhua. It was separately reported that Costa said he shared a strong concern with Li about expanding export controls on critical raw materials, and urged Li to restore as soon as possible fluid, reliable and predictable supply chains. Furthermore, he expressed expectations that China helps to put an end to Russia’s war against Ukraine and stressed the need to make concrete progress as a follow-up to the EU-China summit.
- US President Trump says they will come away with a deal with China.
- US President Trump announced the US is to immediately raise tariffs on Canada by another 10% because of the fraudulent ad misrepresenting Ronald Reagan’s view on tariffs. Trump said Canada has been ripping the US off for a long time, and they're not going to do it anymore.