Opening Bell: Hong Kong News Powers Global Rally; Pound Bounces On PM Defeat
Investing.com | Sep 04, 2019 07:30
- U.S. futures take cue from Asian surge on reports Hong Kong will withdraw extradition bill
- European shares leap as Italy nears new government coalition
- Pound jumps on reduced no-deal Brexit prospects
- Treasurys, gold drop on improved sentiment
Global stocks and futures on the S&P 500, Dow and NASDAQ 100 rebounded this morning as political risk in Hong Kong, Italy and the U.K. eased.
Italian shares led the European rally, as chances of an agreement over a new coalition government increased. The STOXX 600 saw all 19 sectors gain ground, with retail and banking shares at the forefront.
Meanwhile, British Prime Minister Boris Johnson sought to call snap general elections after losing his first vote as country leader in the House of Commons. Investors seemed to reward the vote results—which in theory curbed prospects of a no-deal Brexit—pushing both the FTSE 100 and the pound higher.
Technically, the U.K. benchmark reached the highest price since June 10, but must contend with its broken uptrend line since the December bottom.
For its part, cable is correcting after posting a bullish hammer within a falling channel on Tuesday.
As for U.S. contracts, technically they are all nearing the top of a pennant, bearish after the late July-early August plunge. They are also all trapped between the main MAs, with the 200 MA supporting the pattern, the 50 MA resisting a breakout and the 100 MA staying within the range.
Overall, while the S&P 500 and the Dow Jones are beneath the uptrend lines since the December lows, the NASDAQ Composite returned above it last Monday.
h2 Global Financial Affairs/h2In the earlier Asian session, Hong Kong’s Hang Seng (+3.90%) led all regional indices higher, surging on reports that Carrie Lam, Chief Executive of the city, will withdraw the controversial extradition bill that sparked mass civil protests three months ago.
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Technically, the index completed a small H&S pattern—within a falling channel since April—whose development recently triggered a death cross. As things stand, short-term momentum remains to the upside, but within a medium- and long-term downtrend.
The yield on 10-year Treasurys also rebounded. However, the U.S.-China trade headwind still looms over the market, with Moody’s seeing further escalation .
Technically, yields may be in the process of developing a rounding bottom.
The dollar slipped back below the Aug. 1 high, after yesterday’s shooting star marked a higher peak in the uptrend. We could expect the Dollar Index to retest August highs at 98.40. On the other hand, the USD may be bottoming out with an H&S pattern.
XAU Daily Chart
Gold gave up half of yesterday’s advance, extending a congestion to the seventh consecutive session after an H&S top failure.
Crude oil pared almost half of Tuesday's drop on concerns of a global slowdown hitting demand, but remained below $55.
h2 Up Ahead/h2- Bank of Canada Rate Decision on Wednesday.
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Canadian Exports and Imports for July are released on Wednesday.
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Canadian Trade Balance for July is released on Wednesday.
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Canadian Labour Productivity for Q2 is released Wednesday.
- Bank of England Governor Mark Carney speaks before the Treasury Committee on Wednesday alongside colleagues Andy Haldane, Jonathan Haskel and Gertjan Vlieghe, on the bank’s August Inflation Report. Separately, Carney will also discuss the U.K.’s economic relationship with the EU.
- Fed speakers include New York Fed’s John Williams on Wednesday and Fed Chair Jerome Powell on Friday.
- The U.S. jobs report on Friday is projected to show the widely-watched nonfarm payrolls rose by 158,000 in August, versus 164,000 the month prior. Estimates are for unemployment to be steady at 3.7% and the average hourly earnings rate of increase to slow to 3.0%.
Stocks
Canada’s S&P/TSX Composite closed down 0.26 percent on Tuesday.
- The U.K.’s FTSE 100 climbed 0.2%.
- The MSCI Emerging Market Index increased 0.3%.
- The MSCI Emerging Market Index jumped 1.1%.
Currencies
The Canadian loonie was up 0.07 percent against the U.S. greenback early
- The Dollar Index slipped 0.2%.
- The euro increased 0.1% to $1.0984.
- The British pound advanced 0.5% to $1.2141.
- The Japanese yen depreciated 0.4% to 106.14 per dollar.
Bonds
Canada’s 10-year yield was up early Wednesday at 1.140, a 2.33-percent increase.
- The yield on 10-year Treasurys advanced two basis points to 1.47%.
- The yield on 2-year Treasurys slid less than one basis point to 1.45%.
- Britain’s 10-year yield climbed three basis points to 0.442%.
- Germany’s 10-year yield gained two basis points to -0.69%.
- Japan’s 10-year yield was unchanged at -0.284%.
Commodities
- West Texas Intermediate crude gained 0.7% to $54.32 a barrel.
- Gold decreased 0.5% to $1,538.81 an ounce.
- Iron ore gained 2% to $87.42 per metric ton.
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