US pre-open: China trade call boosts sentiment

Wall Street futures had stocks opening higher ahead of the bell on Tuesday on signs of potential progress in trade talks between the US and China.

As of 1225 BST, Dow Jones futures were up 0.71%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.43% and 0.01% firmer, respectively.

The Dow closed 378.13 points higher on Monday and the S&P closed above 3,400 for the first time ever after the Food and Drug Administration issued an emergency use authorisation for convalescent plasma on Covid-19 patients.

Sentiment was lifted on reports that US and Chinese officials indicated progress in resolving concerns around the Phase 1 trade deal reached between the two countries in January.

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese Vice-Premier Liu He during a "regularly scheduled call", where the parties addressed the steps that China had taken to effect structural changes required in their "phase one" agreement.

"Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement," said Lighthizer's office, while China's commerce ministry added there had been "constructive dialogue" between the two.

CMC Markets' David Madden said: "Equity markets are showing decent gains this morning on the back of optimism surrounding the US-China trading relationship and hopes for a Covid-19 drug. China's ministry of commerce confirmed they held constructive talks with the US with respect to trade, and the US side essentially seconded that.

"Given the exchanges between the two countries recently have been negative, any small bit of positivity is seen as a big step forward, even when it isn’t. The Chinese government are still well behind on their commitments to purchase US goods, but to be fair, some of that is down to the pandemic."

Elsewhere, America's top health official warned of the risks of applying political pressure on the Food and Drug Administration to extend emergency use authorisation for its Covid-19 vaccine candidate before the November presidential elections in the US.

The National Institute of Allergy and Infectious Diseases' head Anthony Fauci emphasised the need to not extend an EUA before there was a "signal of efficacy". Among the potential dangers he cited was the possibility that premature approval might make it more difficult for other vaccines to enrol people in their trials.

Newly confirmed Covid-19 cases in the US have dropped of late, according to Johns Hopkins University, with less than 37,000 cases recorded on Monday - well below even the daily average of 50,000 in mid-August.

On the macro front, June's S&P/Case-Shiller home price index will be released at 1400 BST, while July new home sales data, the Conference Board's August consumer confidence survey and the Richmond Fed's August manufacturing index will all follow at 1500 BST.

No major corporate earnings were slated for release on Tuesday.