Opening Bell: U.S. Equities Rebound; Oil Stabilizes; Dollar Weighs On Gold

Global equities rebounded on Wednesday, as European indices and US futures on the S&P 500, Dow and NASDAQ 100 took their cue from Asian gains.

The previous US session, which saw local indices bounce back from intra-session lows, showed that investors were already on track to find some stronger footing after the quick deterioration of US-China trade relations sparked widespread panic selling in Asia and Europe on Tuesday.

Today, yields on 10-year US Treasurys stabilized around 2.9 percent, and the dollar continued to inch higher.

Does this mean investors can expect a sustained stock rally across global markets? We doubt it, as Asian and European indices have already undergone several reversals. We consider today's rally nothing more than an upward correction within a downtrend.

US majors, however, remain safely within uptrends, and we expect shares will post higher prices later today.

The pan-European STOXX 600 opened in the green, finally halting a three-day slide, as most regional exchanges and sectors were posting gains. Technically, the session low seen on Tuesday formed a second, lower trough than the 382.14 price formed on May 31. This completed the peak and trough succession required to establish a trend.

The downtrend in the continental benchmark had already become clear during Monday trade, when prices crossed markedly below the uptrend line since March 26. The price move also confirmed the downtrend line since January 23. Bulls would have to drive prices above 400.00 to reverse course.

Earlier, during the Asian session, regional indices also attempted a recovery, though the supply-demand balance suggests it may be too little too late to avert a sharper price correction.

Japan's TOPIX turned a 0.9 percent drop into a nearly 0.5 percent advance. The rally was led by growth stocks in the consumer sector, while risk sectors such as materials—the hardest hit by trade uncertainties—and financials retreated. Buyers remembered the last time that prices had rebounded from around the 1730.00 level to 1800.00 in the two weeks between May 30 and June 13, rallying over 4 percent. On the other hand, the index also posted a trough lower than in May, potentially signaling a trend reversal.

China's Shanghai Composite also bounced off the session low, negative 1.2 percent, sealing a 0.4 percent gain. Technically, after drawing a line of demand at the 3000.00 level, a support since January 217, mainland Chinese shares are in a clear downtrend.

Hong Kong's Hang Seng climbed 0.95 percent, ending a four-day, 5.2 percent selloff. Technically, however, the 2.75 percent plunge the index posted on Tuesday completed a consolidation, suggesting a resumption of the double-digit correction seen in February, as nervous sellers lower their prices to find buyers.

South Korea’s KOSPI leaped 1 percent, helped by gains in SK Hynix (KS:000660) (+4.3 percent), Samsung Electronics (KS:005930) (+0.3 percent) and steelmaker Posco (KS:005490) (+0.15 percent). The upbeat performance of these large-cap stocks—all heavily dependent on overseas markets for growth—and in particular the share rebound seen in Posco, the world's third-largest steel producer, underscore remarkable investor optimism in the face of US President Donald Trump's strategic tariff restrictions on the commodity.

However, after falling to the lowest price since September 2017 and thereby completing a conspicuous, full-year, Complex H&S top on Tuesday, the South Korean benchmark showed that:

1. Traders assign far more relevance to the US-China trade war than to the specter of an actual war with North Korea.
2. Traders believe the trade war will curb the current synchronized global economic growth, pushing the supply-demand balance towards an overall selloff.

The price gains seen today fell short of the index top’s neckline.

Australia’s S&P/ASX 200 was once again the regional winner, as 2 percent gains in financials shares helped the Aussie index jump 1.15 percent. Technically, the price withstood yesterday’s powerful shooting star and held onto all its gains, as it traded at the top of the session. As well, it reached the highest level since January 2008, as demand absorbed a line of supply at the 5150.00 level since the beginning of the year, confirming the long-term uptrend since February 2009.