- Treasuries in demand, even while futures rise
- Both dollar and gold find their footing after last week’s slide
- Earnings releases this week include Alibaba (NYSE:BABA), Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Nvidia (NASDAQ:NVDA).
- The EIA’s crude oil inventory report comes out Wednesday.
- The Joint Ministerial Monitoring Committee—the panel that reviews the OPEC+ agreement—is due to meet on Wednesday.
- US Initial Jobless Claims for the week ended Aug. 15 are due Thursday.
- Eurozone PMIs will be released on Friday.
- Futures on the S&P 500 Index increased 0.2%.
- The Stoxx Europe 600 Index fell 1.4%.
- The MSCI Asia Pacific Index was little changed.
- The MSCI Emerging Markets Index gained 0.6%.
- The Dollar Index fell was little changed at 93.11.
- The euro climbed 0.1% to $1.1857.
- The British pound jumped 0.2% to $1.3111.
- The Japanese yen strengthened 0.2% to 106.44 per dollar.
- The offshore yuan strengthened 0.1% to 6.9343 per dollar.
- The yield on 10-year Treasuries sank two basis points to 0.69%.
- The yield on two-year Treasuries decreased less than one basis point to 0.14%.
- Germany’s 10-year yield fell two basis points to -0.43%.
- Britain’s 10-year yield dipped one basis point to 0.235%.
- Japan’s 10-year yield declined one basis point to 0.012%.
- West Texas Intermediate crude climbed 0.3% to $42.35 a barrel.
- Brent crude increased 0.4% to $45.11 a barrel.
- Gold strengthened 0.4% to $1,953.67 an ounce.
Key Events
Futures for the Dow Jones, S&P 500, NASDAQ and Russell 2000 suggest that all four major US equity indices will begin the trading week higher when Wall Street opens on Monday. European stocks fluctuated this morning after Chinese indices returned to outperformance, boosted by the country's central bank providing additional medium-term loans to the Asian nation's economy in a new round of stimulus.
Yields dropped along with the dollar. Gold and silver moved higher.
Global Financial Affairs
After earlier this morning having wavered between gains and losses, at time of writing, all four main US contracts are trading in the green.
Should the ES move above 3,380, it would complete a H&S continuation pattern, suggesting an extended rally.
Shares in Europe whipsawed, but were marginally higher at time of writing, offset by an advance in mining shares, companies with exposure to China where the PBoC has just injected a new round of cash liquidity. However, a selloff in travel shares weighed on the STOXX Europe 600, as coronavirus cases increased on the continent and the UK added France as well as other countries to its quarantine list.
Most Asian indices climbed, edging back to recent highs. The advance was led by China's Shanghai Composite which retook its rightful place as regional rally leaders after a brief period of underperformance. Shares surged 2.3%.
Hong Kong’s Hang Seng came in a distant second, adding 0.6%. Japan’s Nikkei 225 and Australia’s ASX 200, both lagged, each losing about 0.8% of value. Japanese stocks dropped after this morning's GDP release showed the country's economy shrank during the second quarter. Australian shares slumped after Victoria, the country’s second most populous state, reported a record number of COVID-19 deaths.
US stocks finished higher for a third straight week, ending at, or near, record highs. Some may view this as an impressive show of market optimism, but many money managers were cautious, saying investors appear to have gone too far, pricing stocks higher even as the much-anticipated new round of stimulus remains in Congressional deadlock.
Meetings to review the US-Sino Phase-1 trade agreement were put on hold Saturday, with sources citing, "the need to allow time for more Chinese purchases of US exports." Tensions between the two trading partners remain at elevated levels after President Donald Trump officially ordered ByteDance, the Chinese owner of video-sharing app TikTok, to sell its US assets on grounds of national security.
On Monday, yields, including for the 10-year Treasury note, dropped the most in almost two weeks as investors backtracked into Treasuries, after the biggest weekly selloff in over 2 months.
Treasuries stabilized Friday, forming a Hanging Man, the set up for a Treasury short squeeze. That's following through today, confirming the bullish signal triggered by Friday’s Hanging Man.
The Dollar Index is down for a fourth straight day, though it appears that newfound interest in Treasuries has helped the greenback find its footing.
The USD is forming a hammer on the bottom of a pennant, whose downside breakout would set in motion a steeper decline.
Gold initially extended Friday’s selloff, but it has since rebounded.
The yellow metal recouped most of those losses, aiming to resume the rebound from the bottom of a rising channel. Still, the precious metal gave up some of its intraday highs amid the dollar rebound, though the fact that it managed to hold on to most of its gains despite a dollar positioned to advance, along with higher equities, is a very bullish signal to gold.
Silver followed the same recent pattern.
Nonetheless, the white metal's overall trading this month has been according to a H&S top, whose downside breakout would retest the uptrend line.
Bitcoin edged lower, retreating from the $12,000 level and the highest point for the cryptocurrency in a year.
Bulls and bears struggled to keep prices above Friday’s close, below which would confirm the bearish implications of a Hanging Man. The RSI provides a negative divergence, suggesting prices will, in fact, follow lower.
Oil fluctuated after paring Friday’s selloff ahead of an OPEC+ meeting later in the week.
Crude's current pattern makes it difficult to pinpoint a trend. Each new high warrants a redrawing of the trend line to include the new price level.
The pattern appears to be a rising wedge, which suits our own, expressed frustration. However, this pattern is bearish following a decline, though this one follows an advance, leaving us wondering whether the same dynamics would apply?
The RSI, on the other hand, is clear in its negative divergence, adding to the weight of the evidence of bulls losing their patience with an apparent lack of progress. Still, there are those who continue to make a bullish case for oil.