Opening Bell: U.S. Futures Feel The Heat Of New Trade War Front; Europe Bounces
Investing.com | Apr 09, 2019 08:44
- European stocks rebound, U.S. futures remain under pressure after Trump threatens new tariffs on EU goods
- U.S. indices, defensive stocks outperformance signal lingering investor caution
- Pound in the green ahead of key E.U. decision on Brexit delay
- Oil targets $65 h2 Key Events/h2
- The annual Spring Meeting of the World Bank Group and the IMF begins in Washington on Tuesday.
- The ECB is expected to leave its key interest rates unchanged on Wednesday. Investors will be looking for further details on the central bank's TLTRO programme.
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Canadian New Housing Price Index is released Thursday.
- U.S. banks begin reporting first-quarter earnings, led by WFC ) on Friday.
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Canada’s S&P/TSX Composite closed up 0.07 percent Monday.
- The MSCI Asia Pacific Index increased 0.2% to the highest in about six months.
- The MSCI Emerging Market Index advanced 0.4%, reaching the highest in almost 10 months on its ninth consecutive advance.
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The Canadian loonie was up 0.19 percent against the U.S. greenback early Tuesday, trading at 0.7523.
- The Dollar Index dropped less than 0.05% to the lowest in almost two weeks.
- The euro increased less than 0.05% to $1.1264, the strongest in two weeks.
- The Japanese yen advanced 0.1% to 111.35 per dollar, the strongest in a week.
- The British pound gained 0.1%.
- The MSCI Emerging Markets Currency Index inched 0.2% higher.
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Canada’s 10-year yield was down early Tuesday at 1.723, a 0.69-percent decrease.
- The yield on 10-year Treasurys fell one basis point to 2.51%.
- Germany’s 10-year yield fell one basis point to 0.00%.
- Britain’s 10-year yield declined one basis point to 1.108%.
- The spread of Italy’s 10-year bonds over Germany’s climbed less than one basis point to 2.4841 percentage points.
- The Bloomberg Commodity Index increased less than 0.05%, reaching the highest in more than four months on its seventh straight advance.
- Brent crude declined 0.2% to $70.96 a barrel, the largest drop in more than a week.
- LME copper advanced 0.7% to $6,521.50 per metric ton, the highest in about nine months.
- Gold climbed less than 0.05% to $1,297.90 an ounce, the highest in almost two weeks.
European stocks rebounded from an early slide this morning, even after U.S. President Donald Trump NASDAQ 100 pointed downwards, in a sign that investors feared the consequences of opening a new trade war front.
STOXX 600 Daily Chart
The STOXX Europe 600 returned to positive territory after being dragged lower by technology firms and household goods producers, which offset gains in healthcare shares in the early session. However, technically, the index may be trading within a falling flag pattern, bullish in the uptrend this month.
The European Commission AIR ).
In the previous Asian session, local stocks were mixed. China’s S$P/ASX 200 eked out a 0.01% gain.
h2 Global Financial Affairs/h2On Monday, U.S. indices were mixed as a persistent trade impasse between the world’s two largest economies and what is expected to be a tough U.S. earnings season weighed on sentiment.
The Consumer Staples (+0.41%), a defensive sector, posted a mirror gain, demonstrating that caution remains in markets. That wariness is reinforced by the overall paltry results of majors, as well as by yields hovering 20% below their November peak.
Still, the bullish camp would point out that the SPX surged 3.23% in eight sessions, posting a golden cross, and currently challenges the September peak—standing only 1.26% away form it.
Our question is whether disappointing corporate earnings—the heart and soul of fundamentals—will take the steam out of a rally that was powered by what we consider unconstrained greed. After last year’s extraordinary returns, companies are expected to report an almost 4% drop in earnings. Their executives will have to convince shareholders and investors that their stock holdings aren’t going downhill from here.
When Trump's trade rhetoric dominated headlines, we repeatedly warned that monetary policy is the key longer-term market driver. Now that the market seems to have re-focused on the Fed's perceived accommodative shift, however, we'd be keen to remain vigilant over this turn—not because of renewed pressure on policymakers by the U.S. president, but because of the central bank's own reasoning, which may continue shifting.
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In FX trading, the pound pared an advance after testing the 1.3100 level, but remained in positive territory ahead of a crucial meeting between U.K. Prime Minister Theresa May and EU leaders to evaluate the U.K.'s request for a second delay on Brexit deadlines.
UST 10-Year Daily Chart
Yields on dollar were downbeat this morning.
We have been bullish on Treasurys since yields double-topped in October. Also, a continuation pattern in the first couple of months of the year reinforced the downtrend. However, the trading range since last week may be forming a falling flag—bullish following the jump this month—increasing the potential of a fuller return move to the symmetrical triangle since the start of the year. Higher yields—even if resulting from a correction—would likely prompt a temporary equity rally.
WTI Weekly Chart
rigs —which would normally be a catalyst for a selloff. Technically, bulls will have to make their case, as the price nears the $65 level—the lows of June-August last year.
Meanwhile, Saudi Aramco, the world’s largest oil company, has received $75 billion in orders for its debut bond sale on Monday, with yields on the offering likely to fall in line with or below Saudi Arabia’s sovereign debt.
h2 Up Ahead/h2Stocks
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