US equity futures opened sharply higher on Monday, taking positive cues from the G20 meeting in Japan over the weekend.

Dow Jones futures rallied over 200 points to 26,800 points, reaching a record high. Meanwhile, gold and Japanese yen sank at open, suggesting risk appetite is picking up.

The G20 meeting ended with a balanced tone as US and China leaders agreed to re-open trade talks with a warm gesture. A big breakthrough is the allowance of US chip makers to resume shipping to China’s telecommunications equipment and smartphone giant Huawei; a move that is likely to break the ice and allow US technology companies to participate in China’s 5G network building.

Fundamental readings on the other side continue to flag risk of recession in the manufacturing sector. China’s official manufacturing PMI reading came in at 49.4, below expectations of 49.5 and into a second month of contraction. Similarly, Singapore’s recent manufacturing PMIs have also entered into recession, with export to major markets declining sharply.

A string of manufacturing PMIs from European and US markets later today will paint a better picture of the global market outlook. For the EU, manufacturing sentiment has been on a trend of declining since Jan 2018 and recently stabilised at around 47.7 points. Forecasts suggest further consolidation at the current level is likely. For the US, the reading fell sharply over the past six months, due to escalating trade uncertainties and tariffs. Analysts see a fast deterioration in the picture with this month’s forecast at 51.0, a deep correction from previous month’s reading of 52.1.

The weak fundamental outlook is likely to put a sense of caution into investors’ minds, and curb excessive risk-taking.

Crude oil market is supported by a latest agreement between Russia and Saudi Arabia to extend the output cut until end of this year; a move aimed to stabilize oil prices while geopolitical tensions surrounding the gulf area is still on course for rising.

The STI had a decent rebound in June, which saw a 6.9% monthly gain. This week, we may see some mixed movements and perhaps attempts to break through a key resistance zone at around 3,330-3,375 points, where the previous ‘gap-down’ lies.

HK market is closed for a public holiday today.

S&P 500 Index - Cash

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