Market Morning: Futures Fly On China Trade Truce, Shell Gets Pinned, Qatar Bails on OPEC

Futures Explode Higher on US/China Trade War Truce

Everything is up this morning except bonds and cryptocurrencies. S&P 500 futures (NYSEARCA:SPY) rose 1.66% as of 6:30am EST, the Nasdaq (NASDAQ:QQQ) has exploded higher by nearly 2.5%, gold (NYSEARCA:GLD) is up close to 0.7%, oil prices (NYSEARCA:USO) are up by over 4%, European stock indexes are up between 1% and 2% or more, Asian stocks are also up around the same amount, but debt yields are higher today, meaning bonds are lower, as everyone plows into riskier assets on the assumption that a bottom has finally been reached after the October carnage? Has it? We may yet find out by the end of this week.

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This all comes on the news that US President Donald Trump and Chinese President Xi Jinping have called off future escalations of the trade war between the two countries by pledging to leave tariffs as they are for now, until further negotiations can iron out more details. There is a good chance that this was planned between the two sides, as they both knew that good unexpected news would levitate both equities markets in both countries, which is exactly what ended up happening. If you tend to believe that nothing substantial will be worked out in the end, then the move will prove to be artificial and temporary.

Shell Forced Out of Carbon Footprint Shell Game, Will Set Hard Targets

Royal Dutch Shell (NYSE:RDS-A) has caved in to shareholder demands that the oil giant reduce its carbon footprint with medium term targets instead of a broad generalized statement that it hopes to halve its carbon footprint by 2050 with wishy-washy implementation details. Shell previously resisted demands, claiming that setting hard targets would open the company up to litigation for not reaching them or getting accused of fudging them. The new targets, which still have not been specified, will somehow by tied to executive pay, that is when they are specified, which might be by 2020, assuming climate change hasn’t flooded Shell’s headquarters by then.

China To Reduce Tariffs on America Cars

In a move that is positive, headline-redundant, but not very consequential, China has promised to both reduce and remove, simultaneously somehow, 40% tariffs on US auto imports, according to a Trump tweet. The US exported about $10.5B in cars to China last year, so this isn’t going to change the dynamics of the US passenger car market much, given that most of it relies on extremely low interest rates that are the basis of new car financing, which are rising and pinching consumers’ ability to borrow to buy new cars. Nonetheless, it’s a headline generator and both General Motors (NYSE:GM) and Ford (NYSE:F), are up strongly on the news, more than the Dow and the S&P futures are higher today.

The Beginning of the End of OPEC? Maybe Not Yet, But Qatar Leaves

Qatar, which has been harassed and blockaded by Saudi Arabia, is leaving the Organization for Petroleum Exporting Countries, to focus on natural gas. Qatar is one of OPEC’s smallest producers but it has a lot of natural gas (NYSEARCA:UNG), prices for which have exploded higher since November, though they are cratering today, down over 6%. “We are not saying we are going to get out of the oil business but it is controlled by an organization managed by a country,” said Qatar Energy Minister Saad al-Kaabi, in an I-don’t-want-to-play-with-Saudo-Arabia-anymore tone. Some have speculated that even though Qatar’s leaving won’t affect OPEC directly all that much, it could strengthen growing ties between the Saudis and Russia.

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