Wall St futures bounce, Asia still shaky

Asian stock markets were poised for a rocky start after new developments in the US-China trade war spooked markets with already stretched valuations; But there were signs that risk sentiment was calming as Wall St futures rebounded.

Holidays in Japan and the United States on Monday caused volatility in early trading, and political uncertainty still clouds Japanese and European assets.

While US President Donald Trump threatened to impose 100 percent customs duties on China starting from November, he adopted a more conciliatory attitude over the weekend, stating that everything would be fine and that the US did not want to “hurt” China.

Beijing on Sunday defended restrictions on exports of rare earth elements and equipment in response to US aggression, but stopped short of imposing new duties on US products.

“We expect the ultimate solution to be an extension of the current tariff pause beyond November 10 and some new but limited concessions from both sides,” Jan Hatzius, chief economist at Goldman Sachs, wrote in a note.

“But recent policy moves point to a broader range of consequences than before previous US-China talks, with the possibility of greater concessions as well as the risk of significant new export restrictions and higher tariffs, at least temporarily.”

Many world leaders, including Trump, will meet in Egypt on Monday to discuss ceasefire plans for Gaza.

Japanese markets have faced their own problems surrounding the rise of new LDP leader Sanae Takaichi to the premiership, contributing to a sharp rebound in the yen and a 5 percent drop in Nikkei futures on Friday.

Nikkei was closed on Monday; futures were trading up 1.0 percent at 46,560 but still well below the cash close of 48,088.

Wall Street was trying to mount a comeback, with S&P 500 futures rising 0.8 percent while Nasdaq futures rose 1.1 percent.

Earnings season kicks off this week with reports from major banks including JPMorgan, Goldman Sachs, Wells Fargo and Citigroup.

S&P 500 companies are generally expected to grow earnings by 8.8 percent in the third quarter from a year earlier, according to LSEG IBES, and strong results will be needed to justify the market’s lofty valuations.

Politics also cast a shadow over Europe, with the French presidency on Sunday announcing Prime Minister Sebastien Lecornu’s new cabinet line-up and reappointing Emmanuel Macron’s close ally Roland Lescure as finance minister.

Lecornu’s last government lasted just 14 hours and still faces the difficult task of shepherding the 2026 budget through a deeply divided parliament.

Currency markets saw some stabilization on Friday following a rush into the traditional safe havens of the Japanese yen and Swiss franc. The dollar rose 0.4 percent to 151.76, losing 1.2 percent from its peak of 153.29 on Friday.

While the euro remained stable at $1.1609, the dollar rose by 0.2 percent to 0.8010 against the Swiss franc. The dollar index rose slightly to 98.979 after losing 0.6 percent on Friday.

In bond markets, cash treasuries were closed for a holiday, but futures fell 4 ticks as confidence calmed.

Yields fell to multi-week lows after Trump’s tariff threat, as investors increased bets on further Fed rate cuts.

Futures contracts suggest there is about a 98 percent chance the Fed will cut interest rates by a quarter point later this month, with the possibility of another similar move in December.

Fed Chairman Jerome Powell will have a chance to offer guidance when speaking about the economic outlook at the NABE annual meeting on Tuesday.

This week, many other Fed members will be present as well as central bankers attending the IMF-World Bank meeting in Washington.

In commodity markets, gold rose 0.2 percent to $4023 per ounce, just after last week’s record peak of $4057.79.

Oil prices also gained some ground on hopes that the US and China would find some compromise on trade to avoid new tariffs.

Brent rose 1.0 per cent to US$63.36 (A$A97.52) per barrel, while US crude rose 1.0 per cent to US$59.45 (A$A91.50) per barrel.