Top 5 Things to Know in the Market on Tuesday, June 23rd

By Geoffrey Smith 

Investing.com -- President Trump contradicts his most hawkish trade advisor, saying the U.S.-China trade deal is still "fully intact". Peter Navarro meanwhile walked back his comments to Fox that it's "over". Purchasing manager indexes in Europe point to a better-than-expected stabilization after the pandemic and the same firm puts out a survey for the U.S. later. There's also data on new home sales and surveys from Redbook Research and the Richmond Fed. Stocks are set to open higher, but there could be a question mark over Tesla (NASDAQ:TSLA) after a fatal accident in Germany that may have involved its Autopilot future, while oil prices hit their highest since March 3 on growing confidence in the demand outlook. Here's what you need to know in financial markets on Wednesday, June 23rd.

1. This Chinese trade deal is not dead, it's resting          

The U.S.’s trade deal with China is fraying. Trade advisor Peter Navarro told Fox News late on Monday that the deal was “over”, in a conversation that had previously mentioned Chinese backsliding on pledges to buy U.S. farm products and the general deterioration in Chinese-U.S. relations over recent months due to the Covid-19 pandemic and the situation in Hong Kong.

President Donald Trump had responded via Twitter that ““The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!”

The deal, signed in January, was the pretext for suspending tariffs on billions of dollars of Chinese imports in a move that appeared aimed at sparing U.S. consumers further pain in an election year.

2. Europe PMIs point to stronger than expected rebound

There was fresh evidence that Europe’s economy is stabilizing after the sharp drop in output due to lockdown measures in March and April.

HIS Markit’s composite purchasing managers’ index for the euro zone recovered to 47.5 in June from 31.9 in May, reflecting a big upward swing in output expectations and in business confidence. Indexes for France and the U.K. even made it above the 50 line that typically denotes growth.

However, the overall eurozone number indicates that the economy is still contracting, if at a slower pace. As such, it’s more reflective of a tick- or swoosh-shaped recovery than a V-shaped one.

That didn’t stop European stock markets from rallying to their highest in two weeks, Germany’s DAX rising 2.5% and the Stoxx 600 rising 1.5%.

3. Stocks set to open higher

U.S. stocks are set to open higher in the wake of President Trump’s intervention on the issue of the China trade deal. Whether or not the administration feels China is living up to its commitments, the positive reaction to Trump’s tweet suggests that the market is just content that it’s not calling Beijing out on the apparent backsliding yet.

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 By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures was up 226 points or 0.9%, while the S&P 500 Futures contract was up 0.8% and the Nasdaq 100 futures contract was up 0.6%.

In focus later will be T-Mobile (NASDAQ:TMUS), against the backdrop of Softbank’s decision to sell down its stake in the company following the merger with Sprint, a Softbank (OTC:SFTBY) portfolio company. Tesla stock may also attract scrutiny after another fatal crash in Germany that raised suspicions that its Autopilot software may have malfunctioned.

4. U.S. PMI, new home sales, Richmond Fed survey due

After the strong European numbers, IHS Markit will also publish a PMI for the U.S. at 9:45 AM ET (1345).  While the survey isn’t as closely followed as the Institute of Supply Management’s, the two are rarely far apart in their findings.

In addition, there will be an update on the retail sector from Redbook Research at 8:55 AM, and May’s numbers for new home sales at 10 AM. The latter will be released at the same time as the Richmond Fed’s regional business survey.

5. Oil hits highest since March 3 on PMIs; API eyed

Crude oil prices hit their highest level in over three and a half months, after the China news and the European PMIs reassured traders about the future trajectory of global demand.

By 6:30, U.S. crude futures were up 1.7% at $41.44 a barrel, only marginally below the intraday high of $41.56 that was the highest mark since March 3. The global benchmark Brent was up 1.6% at $43.76 a barrel.

The American Petroleum Institute will release its weekly estimate of U.S. crude oil stocks at 4:30 PM ET.