Opening Bell: Dollar Tumbles; Oil Sags; Markets Shrug Off Italian Risk

European equities fluctuated on Thursday morning, as the STOXX 600 struggled to gain traction on the upward momentum of Asian shares. Equity markets in Asia were boosted by rising US Treasury yields, which nonetheless failed to lift the dollar.

The greenback is extending losses today after it suffered its worst selloff since January on Wednesday, as market focus shifted once again from Italian political risk to US-China trade disputes. However, the downbeat dollar helped oil move higher after yesterday’s gains, which marked the biggest jump for the commodity since early April. However, as of this writing, WTI has been losing ground, down right now by 0.60 percent as the European session has progressed.

The failure by European shares to gain upward momentum from the Asian session may underscore investor confusion over a market narrative that, on Wednesday, had transformed a stock selloff into a buying dip. From this standpoint, the volatile market reactions seen earlier in the week from Italian headwinds may now look impulsive and unwarranted.

Overall, it seems, the gravity of broader geopolitical risk is dampening the upward momentum that started during yesterday's US session—which saw US major benchmarks post their strongest performance in three-and-half months.

Although Asian equities rebounded across the board earlier today, it was on a much smaller scale. Plus, by the time the upbeat momentum had reached European markets, it was already showing signs of petering out. Does this mean that by the time the opening bell rings on Wall Street, momentum will reverse? Futures on the S&P 500, Dow and NASDAQ 100 are posting mixed signals, hovering around neutral levels at the time of writing.

However, US stocks are not necessarily bound to replicate European weakness. We have recently pointed out that, for reasons we have yet to understand, as of late, global optimism seems to skip the European session. On more than one occasion we have see equities rally in Asia, drift lower in Europe and then pop again during the US session.

At least from a technical perspective, yesterday's S&P 500 buoyancy confirmed that the current environment is a buyer's market, just as the Treasury yield rebound highlighted that it’s a seller's market for bonds, thereby confirming higher demand for stocks.

The SPX enjoyed its biggest rally since February 11 on Wednesday, confirming an upside breakout of a symmetrical triangle and suggesting a resumption of the uptrend prior to the February selloff. However, a bull trap may be in the works, as only an aggressive 1.00-percent filter has been satisfied.