Trading Day: Risk on, or off? It's trade vs earnings

By Alden Bentley

NEW YORK (Reuters) -Making sense of the forces driving global markets

By Alden Bentley, Editor in Charge, Americas Finance and Markets

Jamie McGeever is enjoying some well-deserved time off, but the Reuters markets team will still keep you up to date on what's happening in markets. I'd love to hear from you, so please reach out to me with comments at Alden.Bentley@thomsonreuters.com

Today's Key Reads

1. US officials blast China's actions on rare earths, urge Beijing to back down

2. Data darkness in US spreads a global shadow

3. Investors on guard for risks that could derail the AI gravy train

4. Morgan Stanley profit beats estimates on dealmaking boost, shares soar

5. Gold extends record run past $4,200 on rate-cut hopes, safe-haven fervor

Today's Key Market Moves

*STOCKS: The S&P 500 closed up 0.4% and Nasdaq was 0.6% higher. The Dow was about flat.

*SHARES/SECTORS: Morgan Stanley shares hit a record high, while Bank of America also rose sharply after the top lenders beat Wall Street estimates for third-quarter profit on dealmaking strength. But financials overall were one of four S&P 500 sectors to show a decline. Real Estate was the biggest winner and tech was also up.

*FX: The U.S. dollar weakened on the continuing trade standoff between the U.S. and China.

*BONDS: U.S. Treasury yields were choppy. The benchmark 10-year was last 1.8 bp higher at 4.0397%

*COMMODITIES: U.S. oil futures eased and the price of gold bullion jumped 1.65% to $4,208.49 an ounce.

*CRYPTO: Bitcoin was down 1.35% at $111,530

Today's Key Talking Points

*Shaking off trade jitters

Wall Street shares rose on the back of solid earnings from Morgan Stanley and Bank of America that concluded a two-day run of strong bank results and raised hopes for company third-quarter reporting over the coming weeks. The S&P 500 banking index was set to log its first three-day winning streak in more than three weeks.

Earnings have only partially overshadowed trade as a focus, with the resurfacing of tensions between the two largest economies roiling the market in recent days. A day after U.S. President Donald Trump said cutting some trade ties with China was under consideration, notably related to cooking oil, while the rivals began imposing port fees on each other, Treasury Secretary on Wednesday told CNBC that there was no desire to escalate a trade conflict with China.

The release of the Federal Reserve's Beige Book did not give the data-starved market much to think about, noting that across the Fed's 12 districts economic activity was little changed. Fed Governor Stephen Miran at a CNBC event said "two more cuts this year sounds realistic", noting that the labor market has clearly weakened. Fed Chair Jerome Powell had also left the door open to rate cuts on Tuesday.

*But safe havens still in play

While stocks had a risk-on tilt through much of the session, bonds and gold traded like safe havens in an uncertain world of trade blow-ups and government shutdowns. Benchmark 10-year Treasury yields initially dipped below 4% on doubts about prospects for an agreement with China, before the bond market retreated in choppy trading. U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent both took China to task over its restrictions on exports of rare earth minerals. Bessent did soften the tone, saying he doesn't believe Beijing wants to be an "agent of chaos."

Gold looked like an over crowded trade, extending its record-breaking rally above $4,200 on the specter of further U.S. easing and the U.S./China trade row.

*While crude is in decline

Meanwhile, oil prices are at their lowest levels since May. While the tit-for-tat trade moves could disrupt global shipping, they could also impact global growth at the same time as the International Energy Agency is predicting a supply surplus next year.

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What could move markets tomorrow?

*No major U.S. corporate earnings or economic data

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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