The G20 meeting might as well have been the G2 meeting, because there was only one item from Buenos Aires that held any real meaning for the stock market. That item was the dinner meeting between President Trump and President Xi, which ended in an agreement to suspend further tariff actions for the next 90 days.
Briefly, President Trump will not raise the 10% tariff rate on $200 billion of Chinese goods to 25% on January 1 in order to allow further time to negotiate a settlement of structural trade issues between the two countries. If an acceptable deal is not struck in the next 90 days, then the tariff rate will reportedly go to 25%.
The press has pointed out this morning that there are different narratives in the U.S. and China surrounding the Buenos Aires "agreement." For instance, China has not publicized a specific 90-day time window.
The different narratives, it has been said, underscore the fundamental differences between the two sides that could make it extremely difficult to resolve the trade differences in the next 90 days. Accordingly, there are contentions that the "agreement" is just a kick-the-can-down-the-road approach and that the stock market's positive takeaway from the "agreement" is an overreaction.
Ultimately, it will be actions -- or the lack thereof -- that speak louder than the hopeful-sounding words out of Buenos Aires, yet it is fair to say now that market participants are relieved at least that things didn't go further south at the dinner meeting with respect to trade issues.
That relief is reflected in the futures market. The S&P futures are up 40 points and are trading 1.3% above fair value. The Nasdaq 100 futures are up 148 points and are trading 2.1% above fair value. The Dow Jones Industrial Average futures are up 437 points and are trading 1.7% above fair value.
There is a risk-on mindset to be sure, which has also underpinned foreign markets. China's Shanghai Composite surged 2.6% and Germany's DAX Index is currently up 2.1%.
The strong indications are apt to be fueling a fear of missing out on further gains and specifically a year-end rally, the prospects of which have seemingly been given new life in the past week with some seemingly dovish-sounding remarks from Fed Chairman Powell and President Trump's characterization of the closely-watched dinner meeting.
It bears noting, however, that nothing has actually been settled on the policy path or China trade fronts, which is why the market could see a path to selling into strength -- maybe not today, but down the road.
Separately, there is a good bit of attention being paid to the oil market today as well. WTI crude futures are up 4.7% to $53.34 per barrel, bolstered by the risk-on mentality and news that the Canadian province of Alberta will be cutting its production by 325,000 barrels per day in an effort to curb excess supply. On a related note, Qatar has announced plans to withdraw from OEPC.
Alberta's move comes just ahead of this week's OPEC+ meeting where it is thought an agreement will also be struck to lower production targets.
That meeting is just one of several important events that will take place this week. Fed Chairman Powell will appear before the Joint Economic Committee on Wednesday to provide his semi-annual testimony and the Employment Situation Report for November will be released on Friday.
Another important event will be the memorial service for President George H.W. Bush. Wednesday, December 5, has been declared a national day of mourning. Per tradition, the market will be closed that day.
Today, though, looks poised to be a day of celebration (at the open anyway) that the Saturday dinner meeting for the G2 created some G-force for a risk-on mindset.