Investing.com - Here are the top five things you need to know in financial markets on Monday, March 26:
1. U.S., China Hold Talks To Avert Trade War
The United States and China have quietly started negotiations to improve U.S. access to Chinese markets, people with knowledge of the matter said, easing fears of a full-blown trade war between the two economic giants.
The Wall Street Journal reported U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer listed steps that Washington wants China to take in a letter to Liu He, a newly appointed vice premier who oversees China's economy.
China's foreign ministry responded favorably, saying it is willing to hold talks with U.S. officials to resolve their differences over trade.
The behind-the-scenes discussions allayed fear of an escalating trade war, sparked after U.S. President Donald Trump moved to slap tariffs on Chinese goods, on top of import duties on steel and aluminum, prompting a defiant response from Beijing.
Still many investors remained cautious given the high level of uncertainty on where any bilateral negotiations may lead.
2. Global Stocks Rebound As Trade Tensions Ease
Global equities bounced back from last week's heavy losses, as appetite for riskier assets improved following reports that suggested the United States and China were seeking trade solutions.
Asian markets finished mixed, with most bourses in the region recovering in late-afternoon trade as selling eased toward the close.
Japan's Nikkei erased earlier losses of 1.3% to end 0.7% higher. Across the Korean Strait, the Kospi climbed 0.8% following news that the U.S. agreed to exempt South Korea from steel tariffs.
Elsewhere, in Europe, the continent's major bourses edged higher in mid-morning trade, with most sectors in positive territory.
The pan-European Stoxx 600 index, the region's broadest measure of share prices, was up 0.3%. In Germany, the DAX tacked on 0.4%, while London's FTSE100 ticked up 0.3%.
Meanwhile, on Wall Street, U.S. stock futures pointed to strong gains at the open, indicating that the major averages were set to rebound after logging their worst weekly performance in more than two years.
The blue-chip Dow futures gained 250 points, or around 1%, the S&P 500 futures advanced 31 points, or about 1.2%, while the tech-heavy Nasdaq 100 futures rose 94 points, or roughly 1.4%.
The Dow and S&P 500 tumbled 5.7% and 5.9%, respectively, last week, while the Nasdaq pulled back 6.5%.
3. Dollar Starts The Week Lower
The dollar started the week lower, falling to its weakest level in more than a month against a currency basket, as investors remained wary about the greenback's outlook.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, touched an overnight low of 88.84, a level not seen since Feb. 19. It was last at 88.90, down around 0.3% on the day. The index lost roughly 1.3% last week.
The dollar slumped to a 16-month low against the yen at one point, before turning higher as risk sentiment improved. USD/JPY was up 0.3% to 105.08, after slumping to 104.62 overnight, the weakest level since November 2016.
In the bond market, the U.S. 10-year Treasury yield inched up 2.2 basis points to 2.848%.
4. Trio Of Fed Speakers In Focus
With no major economic data on Monday's calendar, a trio of Federal Reserve speakers will get the market's attention today, as traders watch for more clues on the pace of monetary tightening this year.
New York Fed boss William Dudley will participate in a panel discussion about regulatory reform at the United States Chamber of Commerce, in Washington DC at 12:30PM ET (1630GMT).
Afterwards, Cleveland Fed President Loretta Mester is scheduled to speak about the economic outlook and monetary policy at Princeton University, in New Jersey, at 4:30PM ET (2030GMT).
Later on, Fed Vice Chair Randal Quarles is due to speak on consumer protection and small business at a forum in Atlanta at 7:10PM ET (2310GMT).
The final reading of fourth-quarter U.S. growth will be the highlight of the holiday-shortened week ahead.
The Fed raised interest rates as expected last week, but stuck to its forecast for two more hikes this year, disappointing investors that had expected the U.S. central bank to project three more rate hikes this year.
Traders are currently pricing in around an 85% chance of a second hike in June, according to Investing.com’s Fed Rate Monitor Tool. Odds of a third rate hike by December was seen at about 75%.
5. Oil Prices Pull Back Amid Rising U.S. Shale Output
Oil prices pulled back from their best level in two months, as rising drilling activity in the United States pointed to further increases in shale output, underlining concerns about a return of oversupply.
WTI crude futures shed 40 cents, or 0.6%, to $65.47 per barrel, while Brent futures dipped 25 cents, or 0.4%, to $69.56 per barrel.
U.S. drillers added four oil rigs in the week to March 23, bringing the total count to 804, the weekly Baker Hughes drilling report said on Friday.
The U.S. rig count, an early indicator of future output, is much higher than a year ago, as energy companies continued to boost spending since mid-2016, when crude prices began recovering from a two-year crash.
Both benchmarks reached their strongest level since Jan. 25 earlier in the session, as the prospect of an extension to OPEC-led production cuts into next year provided support.