Opening Bell: China Data Pressures Futures, Stocks; Gold Slips, USD Up

• China retail sales disappointed, overshadowing better-than-expected GDP
• The US and China extend their tit-for-tat spat
• Risk-off sentiment pervades markets

Key Events

A slew of Chinese economic data, released on Thursday, sent US contracts for the S&P 500, Dow Jones, NASDAQ and Russell 2000, along with global stocks, lower. The data out of China illustrated there's a bumpy road forward toward economic recovery, as COVID-19 continues to rev up worldwide, threatening additional lockdowns.

Demand rose for Treasuries, boosting the dollar, at the expense of gold, while the yen also gained.

Global Financial Affairs

Even though China’s GDP surprised to the upside, clearly showing a return to growth for the Asian nation in the second quarter, June retail sales disappointed, showing the contraction on this metric had deepened. As the first country to have restarted their economy after the coronavirus breakout, China’s data may be viewed as a bellwether for the global economy.

Adding to market headwinds were increasing tensions between China and the US. After sanctioning banks doing business with Chinese officials, the US is now considering broad travel restrictions for officials of China's Communist Party.

This morning, all major Asian markets were in the red, as were US futures. NASDAQ contracts were the hardest hit, down almost 1.5% at time of writing, extending a period of underperformance for the tech-heavy index, after it was responsible for supporting the broader US stock market.

Contracts on the SPX pointed to an open that would erase the S&P 500's gains from the previous day.

SPX Futures Daily

From a technical perspective this would confirm a high-wave doji, whose resistance reinforced that of the June 8 high—after falling below the uptrend line since the famous March bottom. This sets it up for a double-top. Note, the RSI’s negative divergence, falling versus the rising price, forming a H&S top, no less.

The Stoxx Europe 600 Index dropped ahead of today's ECB meeting.

STOXX 600 Daily

The move wiped out much of yesterday’s gains—after finding resistance by the 200 DMA, which reinforces the resistance of the broken uptrend line that has been in place since the March low—falling back into a symmetrical triangle.

As with S&P 500 futures, the pan-European index is forming a H&S pattern. While no change is expected to rates or QE, focus is sure to be on ECB President Christine Lagarde’s press conference, ahead of a EU meeting about a 750 billion euro recovery fund.

While all major Asian indices closed in negative territory, China’s Shanghai Composite plummeted 4.5%. Though we've often noted that Chinese stocks seemed unaffected, and even outperformed, despite the virus and tensions with the US, it seems as if the headwinds might now be closing in on Chinese shares.

The slump in the China’s retail sales during June offset the encouraging news of its economic expansion YoY, which surged 3.2%, far more than the 1.3% estimated. However, similar to developed economies, the Chinese retail sector has evolved and now plays a key economic role. Without a true recovery it will prove challenging indeed for China to maintain a solid path to growth.

Rising demand for Treasuries pushed yields, including for the 10-year note, down to test Monday’s close.

UST 10Y Daily

It was the lowest level for rates in over two months, since May 14. Technically, rates remained below the downtrend line since the Jun 5 high, after having broken the uptrend line since April 21.

Increased demand for Treasuries pulled the dollar higher, though it's currently trading below its session highs.

DXY Daily

From a technical standpoint, it might be ripe for a corrective rally, having reached the bottom of the rising flag before it falls lower.

Dollar strength came at the expense of gold.

Gold Daily

The yellow metal wiped out gains since July 10. The price fell below its falling channel, but it remains above a falling flag. If the flag fails, we’d expect a pullback before the precious metals rally continues.

Bitcoin sold off for a second day, after Twitter accounts belong to some well-known celebrities and political figures were hacked in a Bitcoin scam.

BTC/USD Daily

Technically, the digital currency might be topping out, as the RSI provides a negative divergence.

Up Ahead

• US Retail Sales, reported later today, might gain additional focus after Chinese data disappointed.
• Today's ECB press conference will be a centerpiece in the region's struggle to restart its economy.
• Tomorrow brings the release of the euro area’s CPI data, followed by a speech by the BoE's Governor Bailey.

Market Moves

Stocks

• Futures on the S&P 500 Index dipped 0.5%.
• The Stoxx Europe 600 Index declined 0.5%.
• Germany’s DAX decreased 0.4%.
• The MSCI Asia Pacific Index dipped 1.4%.

Currencies

• The Dollar Index advanced 0.2% to 96.20.
• The euro dipped 0.1% to $1.1401.
• The Japanese yen was little changed at 106.99 per dollar.
• The British pound fell 0.3% to $1.2551.

Bonds

• The yield on 10-year Treasuries dipped one basis point to 0.62%.
• Germany’s 10-year yield decreased one basis point to -0.45%.
• Britain’s 10-year yield declined one basis point to 0.153%.

Commodities

• West Texas Intermediate crude dipped 0.6% to $40.94 a barrel.
• Gold weakened 0.2% to $1,806.79 an ounce.