Opening Bell: Markets Wake To Fed's Economic Pessimism; Yields Tumble
Investing.com | Mar 21, 2019 08:59
- Global stocks drop as dovish Fed confirms economic slowdown
- Treasury yields tumble to lowest level in a year; dollar rebounds from Fed-led drop
- Sterling falls on May's request for Brexit deadline extension
- Oil hits $60 for the first time since November but later slips lower h2 Key Events/h2
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Canadian ADP Nonfarm Employment Change is released Thursday.
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Canadian Wholesale Sales for January are released Thursday.
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Canadian CPI and Core CPI are released Friday.
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Canadian Retail Sales for January are released Friday.
- Central banks in Indonesia are all scheduled for policy meetings this week.
- In the euro zone, PMI numbers out on Friday will give an indication on the health of the region’s service sectors at the end of the first quarter.
- Nike (NYSE:NKE) (NYSE:remains on an upward trajectory .
- Tiffany&Co is expected to release earnings before market open on Friday, with a $1.6 EPS and $1.34 billion forecast.
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Canada’s S&P/TSX Composite closed down 0.13 percent Wednesday.
- The S&P 500fell 0.3 percent.
- The STOXX 600 declined 0.9 percent.
- U.K.’s FTSE 100 fell 0.5 percent.
- Germany's DAX slid 1.6 percent, its biggest tumble in almost six weeks.
- The MSCI Emerging Market Index gained less than 0.05 percent.
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The Canadian loonie was down 0.27 percent against the U.S. greenback early Thursday, trading at 0.7495.
- The U.S. Dollar Index rose 0.2 percent.
- The euro advanced 0.7 percent to $1.1433, the strongest in over six weeks.
- The British pound sank 0.5 percent to $1.3203.
- The Japanese yen climbed 0.7 percent to 110.62 per dollar.
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Canada’s 10-year yield was down early Thursday at 1.655, a 0.72-percent decrease.
- The yield on 10-year Treasurys decreased eight basis points to 2.53 percent, a 14-month low.
- Germany’s 10-year yield declined one basis point to 0.08 percent.
- Britain’s 10-year yield dipped three basis points to 1.157 percent.
- West Texas Intermediate crude gained 1.4 percent to $59.83 a barrel, a four-month high.
- Gold rose 0.6 percent to $1,314.14 an ounce.
Asian markets chaperoned Wednesday's U.S. losses into the European session this morning, with futures on the new warnings that U.S. tariffs on Chinese goods may apply for a "substantial" period of time.
The STOXX 600 opened 0.15% lower, adding to yesterday's selloff, which erased two days of gains. Technically, the 50 DMA, which was approaching the 200 DMA from the bottom as bulls cast their hopes in a golden cross, may be heading towards a sell signal, as the 200 DMA forces the 50 DMA lower.
In the earlier Asian trading, most regional benchmarks posted a slide. Japanese indices and Hong Kong's 10-year Treasurys tumbled as investors rotated into bonds.
The Energy (+0.88%) did little to offset losses in banks.
S&P 500 Hourly Chart
Technically, the SPX price fell below the most recent uptrend line, since the previous Tuesday, which turned into a proven resistance, erasing the dovish-Fed rally. The trading pattern may be developing a short-term H&S top.
Dow Jones Daily Chart
The lower interest-rate outlook , provided a potential tailwind for multinational companies. Technically, the gauge matched the SPX trading pattern. On the daily chart the picture is weaker, as last week’s rally failed to seal a trough higher than February’s low. While a Golden Cross was recently triggered, the 200 DMA could become the neckline of a top.
The NASDAQ Composite was the only index closing in green territory (+0.07%).
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Yields slid toward 2.5% this morning, extending Wednesday’s drop to the lowest rate in over a year—in line with our expectations of a bearish pennant completion after a symmetrical pattern, bearish in a downtrend, after the long-term uptrend line was violated. This outlook was at the core of our diffidence around the rally that started after Christmas.
DXY Daily Chart
The dollar index found support by the 200 DMA, acting as an organic uptrend line and ascending channel bottom. Increased demand for Treasurys naturally boosts the greenback, which rebounded overnight from an initial Fed-driven drop. The USD also benefited from mounting pressure on the pound , which inched lower after U.K. Prime Minister Theresa May asked for a three-month extension on Brexit, heightening the risk of a disorderly separation from the EU.
Meanwhile, the yuan recovered from an initial sharp drop, but remained lower versus the dollar.
In Hong Kong, the de facto central bank once again bought the local dollar after the city’s exchange rate fell to the weak end of its trading band against the greenback.
WTI Daily Chart
weighing the contrasting forces of strong U.S. demand and weak European and Chinese indicators.
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