Futures on the S&P 500, Dow and NASDAQ 100 rebounded from an early slide this morning, while European shares remained under pressure from weak corporate results and conflicting headlines on U.S.-China trade negotiations.
The STOXX 600 swung between gains and losses in a tumultuous opening session: it opened around 0.1 percent lower following a mixed Asian session—tracking mixed reports about the outlook of trade talks. The pan-European index then jumped into positive territory, nearing 4-month highs, thanks to a Reuters report that Chinese and U.S. negotiators were nearing some draft commitments on a number of the most contentious issues of their 11-month old trade dispute.
Later, however, poor earnings reports pushed the benchmark back below opening levels. Technically, should the price close at the current weak levels, it would form a shooting star, bearish in an uptrend.
British multinational energy and services firm Centrica (LON:CNA) underperformed, plunging 11 percent, after it warned the recently-introduced national energy price cap will squeeze cash flow and hurt its financials this year.
Meanwhile, Danish Moeller - Maersk (CO:MAERSKb), the world's largest shipping company, tumbled 8.7 percent even after meeting analyst expectations, after it warned that trade war jitters may hurt future profits. Though we have no real answer, we can't help but wonder why investors would decide that the stock is worth almost 9 percent less, if at the same time they were bidding market prices up based on positive trade headlines?
Yields on 10-year Treasurys jumped, which is typically considered bullish for equities: investors would presumably sell safe-haven assets to reinvest in riskier assets. However, we expect yields to fall after they break out to the downside of a symmetrical triangle, bearish in a downtrend, whose top is pressured by the 50 DMA, after the 100 DMA already crossed below the 200 DMA. Such a breakout would be a bearish signal for equities, suggesting a trend in which investors seek safety over growth.
Germany's 10-year yields tracked U.S. Treasurys higher, while Japan's 10-year yields fell to their lowest levels since November 2016—when they began a sharp climb after newly-elected U.S. President Donald Trump revived the stock market's bull spirit. Has Japan's economy lost its momentum?
The greenback gave up an advance against the yuan, sliding for the third day and touching the lowest since mid July, even after coming back from a 0.44 percent decline.
Gold is trading near its highest price since May. It's difficult to attribute the trend to dollar weakness, considering the USD has been on an overall upward trajectory in February and just about 0.6 percent away from the highest level since mid December.
In yesterday's U.S. session, equities edged higher, with the S&P 500 eking out a seventh consecutive advance, after minutes from the last Fed monetary policy meeting showed policymakers are looking to halt quantitative tightening later this year. Moreover—and in stark contrast with Moeller-Maersk's bleak trade war-driven outlook—Caterpillar (NYSE:CAT) jumped after providing a positive view for Chinese demand, boosting the Materials sector.
While bets are rising for a resolution of the U.S.-China tariffs spat, Fed minutes fell short of lifting equities as much as when Chair Jerome Powell pronounced the words "patience" and "flexible," just a few weeks ago. This could indicate that this time the market narrative had already priced in the central bank's dovish turn.
However, we have been warning of a reversal. The 18%, post-Christmas U.S. stock jump is showing signs of running out of steam. Today's report from Reuters would have been a strong, positive catalyst just a month ago. Conversely, when good news is dismissed so precipitously, any bit of bad news threatens to throw the stock market into chaos.
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