U.S. Opening Bell: European Earnings, China Stimulus Promise Fail To Lift Futures
Investing.com | Apr 26, 2022 07:46
- China vows economic support amid increasing COVID-19 cases
- Earnings ignite European stock bulls
- US stock trading wavers h2 Key Events/h2
- On Wednesday, ECB President Christine Lagarde is due to speak.
- EIA crude oil inventories are announced on Wednesday
- US pending home sales for March are published on Wednesday.
- The MSCI Asia Pacific Index fell 2.09%
- The MSCI Emerging Markets Index fell 2.75%
- The euro fell 0.2% to $1.0691
- The Japanese yen fell 0.3% to 127.76 per dollar
- The British pound fell 0.23% to $1.2711
- Germany's 10-year yield fell to 0.82%
- Britain's 10-year yield rose to 1.84%
- Brent crude fell 0.25% to $102.3 a barrel
- Spot gold rose 0.3% to $1904.1
European shares rose on Tuesday while US futures on the Dow Jones, S&P 500, NASDAQ and Russell 2000 were lower following a mixed session in Asia.
The People's Bank of China's promise to support the country's economy—after coronavirus lockdowns in Shanghai and Beijing spooked markets by raising concerns of slower global growth and additional supply chain constraints—failed to calm investor nerves. However, European shares were buoyed by better than expected corporate earnings.
The oil price slide continued on concerns about future demand.
h2 Global Financial Affairs/h2Despite a positive flow of funds to equities on favorable European earnings and the reassurance from China's central bank regarding help for the local economy, all four US futures contracts were trading in the red. Contracts on the Russell 2000 were outperforming while Dow futures lagged.
That's surprising given that the two indices are weighted toward cyclical stocks. However, small caps have been depressed since the US Federal Reserve turned hawkish on rate hikes. Smaller, domestic firms are at a disadvantage over larger multinationals when it comes to finding solutions to higher US borrowing costs. Therefore, we consider the current Russell outperformance as a correction within a downtrend.
Earlier today, European shares rebounded from yesterday's selloff after results from Swiss bank UBS (SIX:UBSG) and Danish shipper Maersk (CSE:MAERSKb) helped improve investors' outlooks on global growth.
The pan-European STOXX 600 Index bounced nearly 1% with mining and oil sectors. Still, it's significantly lower after Monday's 1.8% selloff after the near 3.6% drop in the preceding two days.
The continent-wide gauge topped out after the 50 DMA failed to provide support. Before that, the 100 DMA crossed below the 200 DMA. Previous to that, the 50 DMA could not remain above the 200 DMA, triggering a much-dreaded Death Cross. Moving averages are now in a bearish pattern, in which each set of prices is worse than a previous period, portraying a general breakdown of demand among multiple timelines.
UBS' Q1 numbers were ahead of expectations, even as it reduced its exposure in Russia, at a cost of $100 million. The Swiss financial company benefited from a spike in trading.
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The stock rebounded from an initial selloff, forming an imperfect hammer (with a slight upper shadow), which requires a closing price. Moreover, the slight rebound comes after the price already failed to remain above the 200 DMA while the 50 DMA crossed below the 100 DMA.
Furthermore, the price's recent peak on Apr. 4 registered lower than the preceding high of Feb. 10. Together with the bearish MA crosses, the company is showing weakness. A drop below the Mar. 7 low will establish a descending series of peaks and troughs, setting a downtrend. Finally, if the price does fall that far, it will have topped out from a pattern going back to December 2020.
Maersk, the Danish container shipping giant raised its guidance for 2022 on strong transport rates as the container boom endures.
Like UBS, however, technicals are worrisome.
After the daily MA served as support in early March, the stock retracted daily highs, having found resistance by the 200 DMA for the second time in a row, suggesting a flip in sentiment. Earlier this month, the 50 DMA fell below the 100 DMA for a more negative outlook. The stock may have been developing a large H&S top since June.
Despite the Chinese central bank's announcement, the Shanghai Composite still tumbled 1.44% and very nearly finished at the bottom of the session. The only index which posted a weaker performance was Australia's ASX 200, with a 2.08% slump triggered by a drop in commodity prices due to dampening demand from China.
Yesterday on Wall Street, US shares sharply rebounded late in the session from deep losses. We warned that bulls would be hopeful that strong earnings from US tech giants could save the day. Therefore, traders will be closely watching results from Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) this week.
We also predicted that unless Friday's inflation report will signal a peak, there is no rationale for stocks to turn around.
On Monday, the S&P 500 came back to life from from Friday's 1.66% loss, gaining 0.57% to close near the top of the session.
Bulls may hope for an H&S Bottom, but seeing is believing. Aside from the fundamentals—an escalating global supply crunch driving up inflation, pushing the Fed to increase the rate of its interest rate hikes—technicals also look weak. The 50 DMA slumped below the 200 DMA, triggering a Death Cross, and the broad benchmark may be developing a sizeable H&S top since September.
However, the NASDAQ 100 was yesterday's US outperformer with a 1.32% gain in absolute terms.
For the second day in a row, Twitter (NYSE:TWTR) opened higher after the social network platform accepted the $44 billion buyout deal from Tesla (NASDAQ:TSLA) founder, Elon Musk. Volatility in the stock is likely to continue.
Shares in the social network extended the upside penetration of a falling wedge and closed above the 200 DMA. The 50 DMA is getting ready to best the 100 DMA. While a pullback is possible, the stock aims higher.
Yields on the 10-year Treasury note slipped for the fourth day, the same number of days during which the dollar has rallied. Bond investors have been on a roller coaster ride and the outlook remains uncertain.
The greenback has already realized the implied targets of the preceding two patterns. So, expect a retracement as the RSI struggles to maintain its overbought levels.
Gold found its footing despite dollar strength.
The yellow metal struggled between the demand of the bottom of a Symmetrical Triangle and the supply that has kept the price at bay. The RSI suggests the downside penetration may hold. The mid-November peak may prove to support.
Bitcoin was little changed after paring gains built on yesterday's jump.
Oil declined for a third day due to China's COVID lockdowns. The country is not only the world's second-largest economy, but the world's biggest oil importer.
Technically, it appears that WTI traders await a catalyst. The direction of the breakout of the triangle is likely to determine the commodity's trajectory.
h2 Up Ahead/h2
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