Opening Bell: Futures, Stocks Wobble As China-U.S. Tensions Ramp Up; Oil Flat

• Asian chipmakers selloff after US adds restrictions on China's Huawei
• NASDAQ tags new record, SPX doesn't
• Yields continue to drop, dragging the dollar to a 27-month low, buoying gold

Key Events

US index futures for the S&P 500, Dow Jones, NASDAQ and Russell 2000 fluctuated on Tuesday along with European shares as tensions between the US and China escalated once again.

Yields dropped, dragging the dollar to a 27-month low. Gold extended an advance and oil was flat.

Global Financial Affairs

President Donald Trump increased the pressure on China, announcing additional restrictions on Huawei Technologies. On Monday the White House "banned suppliers from selling chips made using US technology to the [Chinese] firm without a special license."

Nevertheless, though markets sold off earlier, at time of writing it appears investors had decided all this was just more of the same and regional indices as well as futures have reversed. Still, Asian chipmakers including Taiwan’s MediaTek Inc (TW:2454) slumped after the US announcement on Huawei.

The Stoxx Europe 600 Index initially fell, along with jewelry maker Pandora (BS:PNDORc) after weak guidance warned shareholders sales may fall up to 20% for the year.

STOXX 600 Daily

But the pan-European index soon reversed. Today's gains struggled against a broken, short-term uptrend line, while the overall pattern may be that of a H&S top.

Regional indices were mixed during Tuesday's Asia session. South Korea’s KOSPI dropped sharply (-2.5%) on signs of the pandemic’s resurgence. The second worst performer, Japan’s Nikkei, dropped far less, (-0.2%). Australia’s ASX 200 was boosted by the release of the RBA minutes, (+0.8%). Healthcare and consumer stocks also rose.

Yesterday, US stocks continued their upward climb, spearheaded by the tech industry. While the NASDAQ Composite posted a new all-time high, the S&P 500 failed to do the same. For a third time, the SPX touched its record from below but the broad-based index simply couldn't close the deal.

SPX Daily

The index broke past its previous record close (black line) but only on an intraday basis, while falling short of touching the all-time high (red line).

Despite the equity gains, investors increased positions in Treasurys, including the benchmark 10-year note.

UST 10Y Daily

Yields were pushed lower after yesterday’s trading confirmed the bearish signal from Friday’s hanging man. Indicators, too, are topping out.

Falling yields dragged the dollar lower, its fifth straight decline.

DXY Daily

The USD completed a bearish pennant within a falling channel. Beneath it, at around 91.5, awaits the long-term uptrend line and rising channel bottom since 2009.

The weaker dollar made gold more affordable, pushing the yellow metal's price up for a fourth day out of five, once again above $2,000.

Gold Daily

The precious metal rebounded from the bottom of a rising channel, returning to record high territory, providing a conflicting picture as yields returned to record lows even as equities remain at all-time high levels.

Oil bulls pushed bears back.

Oil Daily

WTI edged higher, rising for the second day. The price of the commodity is now sitting above the 200 DMA for a fifth straight day.

Up Ahead

• Earnings releases this week include Target (NYSE:TGT) and NVIDIA (NASDAQ:NVDA) on Wednesday; Alibaba (NYSE:BABA) and Qantas Airways (OTC:QABSY) on Thursday.
• Minutes of the July FOMC meeting are due Wednesday.
• The EIA’s crude oil inventories 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.
• Euro-area PMIs will be released on Friday.

Market Moves

Stocks

• Futures on the S&P 500 Index dipped 0.2%.
• The Stoxx Europe 600 Index fell 0.7%.
• The MSCI Asia Pacific Index gained 0.2%.
• The MSCI Emerging Markets Index decreased 0.1%.

Currencies

• The dollar spot index fell 0.3%.
• The euro increased 0.2% to $1.1899.
• The British pound gained 0.5% to $1.3169.
• The onshore yuan strengthened 0.1% to 6.928 per dollar.
• The Japanese yen strengthened 0.5% to 105.44 per dollar.

Bonds

• The yield on 10-year Treasuries declined two basis points to 0.66%.
• The yield on two-year Treasuries decreased less than one basis point to 0.15%.
• Germany’s Germany 10-year yield fell one basis point to -0.46%.
• Britain’s 10-year yield declined one basis point to 0.205%.
• Japan’s 10-year yield decreased one basis point to 0.036%.

Commodities

• West Texas Intermediate crude declined 0.4% to $42.72 a barrel.
• Brent crude decreased 0.2% to $45.26 a barrel.
• Gold strengthened 0.7% to $1,999.33 an ounce.