US pre-open: Stocks seen higher as dollar gains; Treasury yields rise

US futures looked set to extend the Trump rally on Monday as investors remained optimistic that his policies will fuel economic growth.

At 1105 GMT, Dow Jones Industrial Average futures were up 0.5%, while S&P 500 and Nasdaq futures were up 0.3%.

CMC Markets’ Jasper Lawler said: “US stocks look set for a higher open and another new record high for the Dow Jones Industrial Average, now on the march towards 19,000. Donald Trump’s staff appointments will signpost whether the notable sector rotation that began in the wake of the election result actually makes sense.

“The move into financials and basic materials is part of a reflation trade that started before the election, though it has clearly accelerated since. A return to New Deal-esque infrastructure spending is probably one of the areas Donald Trump will struggle the most to get through the fiscally-conservative Republican congress. That makes the rise in industrial and construction stocks the most vulnerable.”

Meanwhile, oil prices slipped amid ongoing worries about oversupply. West Texas Intermediate was down 0.4% to $43.23 a barrel and Brent crude was 0.3% lower at $44.63.

In currency markets, the dollar was up 1.2% versus the yen at 107.95, 0.8% higher against the euro at 0.9287 and 0.5% firmer versus the pound at 0.8003.

US Treasury bonds were under pressure, however, with the yield on the 10-year bond trading at its highest level since early January amid worries that Trump’s policies with be inflationary, causing the Federal Reserve to hike rates sooner than expected. Bond yields move inversely to prices.

Societe Generale said: “The election of Trump and his promises of fiscal stimulus have opened the floodgates, with a rush to sell bonds. However, the reality is that the bearish bond backdrop has been building since summer. We see no let-up just yet and suggest remaining short duration. On the curve, we continue to favour trades that perform in a bear-steepening environment.”

In corporate news, Mentor Graphics Corp surged after Siemens agreed to buy the company in a deal worth $4.5bn.

Harman International Industries was in focus after Samsung Electronics Co said it would buy the US auto-parts supplier for $8bn in an all-cash deal.

Earlier, data out China was mixed. The country’s fixed-asset investment was up 8.3% in the January-to-October period, ahead of forecasts, but industrial output and retail sales growth in October fell short of analysts’ expectations.