- Congress approves $900B coronavirus relief bill, investors not impressed
- Brexit negotiations fail to resolve
- Markets remain pressured by new coronavirus lockdowns, border closings
Key Events
US futures for the Dow Jones, S&P, NASDAQ and Russell 2000 wavered between losses and gains on Tuesday, while European shares steadied, rebounding after their worst selloff in nearly two months on Monday. The resumption of Brexit negotiations and passage by Congress of the $900 billion, US stimulus package yesterday evening offset fears of the new variant of the coronavirus that has appeared in the UK.
The dollar rose for a third straight day. Gold and oil dropped.
Global Financial Affairs
US lawmakers overwhelmingly passed the long-contested stimulus package on Monday night. While the New York Times characterized the bill as “huge coronavirus relief,” it was scaled back from the $2.5 trillion aid package originally sought by Democrats.
The continued slide of stocks on Wall Street yesterday as well as this morning's early dip in US contracts suggest the stimulus is likely already all priced in.
While the Stoxx Europe 600 Index was 1.1% higher earlier today, it's now lower but remains in the green at time of writing. The pan-European index's gains are being led by banks and travel firms, suggesting hope for life after lockdowns. Nonetheless, the benchmark is still 1.2% lower than where it stood at Friday’s close.
As such, the European gauge pared less than half of yesterday’s selloff, demonstrating that the new strain of COVID and the wave of stricter lockdowns and border closings have left their mark. The UK's FTSE 100 underperformed the major European indices, and the pound weakened for the third day, albeit because of still undecided issues surrounding a Brexit deal or perhaps more likely the new virus mutation. Some would find that ironic after the UK was the first country to begin vaccinating its citizens.
We, however, are impressed by sterling’s resilience, and have previously demonstrated it could rally much, much higher...under the right conditions. Note yesterday’s profound rebound, which trimmed a 2.5% plunge, turning it into a mild 0.4% dip.
Cable found support by the dual 50 and 100 DMAs, hugging the uptrend line since the March bottom. It's on the verge of completing a massive bottom.
However, right now Britain is between a rock and a hard place as the country faces shortages after France closed its borders to block the mutated strain of COVID. With the scary prospect of the island nation’s isolation, UK Prime Minister Boris Johnson was motivated to offer a new concession to EU negotiators, to beat the deadline for signing a trade deal with the European Union. Unfortunately, Bloomberg just reported the offer was rebuffed.
Earlier Tuesday, Asian markets declined after the Trump administration added another 59 companies to its blacklist of Chinese companies, provoking a Chinese retaliatory threat to any Sino-US trade deals. China’s Shanghai Composite dropped, -1.9%. Australia’s ASX 200 fell 1.00%, and Hong Kong’s Hang Seng slumped, -0.7%. Both indices extended a selloff for a third straight day.
Yesterday during the New York session, American equities joined the global selloff amid fears fueled by the new coronavirus strain in the UK and tighter lockdowns.
On Monday, the S&P 500 Index fell 0.4%, weighed by Tesla (NASDAQ:TSLA)—which plummeted 6.5%—as it debuted on the benchmark index.
The Dow Jones Industrial Average, +0.1, finished in the green, yanked higher by Goldman Sachs's (NYSE:GS) 6.1% leap after regulators approved the investment bank's stock buyback plan.
Yields, including for the 10-year Treasury note, returned to a dip, after yesterday’s sharp rebound—mirroring the pound—as investors rotated back into Treasuries.
The rebound came after yields found support precisely above the 50 DMA, “guarding” the bottom of a rising channel. EU bonds may be changing the landscape for government debt, but Treasuries will continue to rule in 2021.
The dollar is up for the third day.
The same extremely long shadow visible with Treasuries and the GBP can be seen on the USD, only in the opposite direction, on top of the candle. The greenback climbed on Monday, the most since the March peak, forming a rising flag.
When touching the bearish pattern, the currency recoiled, rushing almost the whole way back down, increasing our bearish stance.
In a mirror image to the dollar's advance, gold retested resistance.
Yesterday, the yellow metal gave traders a bullish ride as the price whipsawed wildly when the short and medium terms collided. Gold's 'poorer cousin,' silver, could be setting up for a better opportunity right now.
Bitcoin was little changed after falling yesterday for the second day in a row, after it notched a fresh all-time high on Saturday, at $24,122.67.
The growing number of lockdowns pressured oil, pushing it lower for the second day.
The price of the commodity fell below its uptrend line since the November low, and both the MACD and the RSI topped out.
Up Ahead
- The US reports Consumer Confidence figures for December on Tuesday.
- EIA weekly Crude Oil Inventories will be released Wednesday.
- Also on Wednesday, U.S. Initial Claims along with New Home Sales will print.
- The US bond market and stock trading in other parts of the world will shut early on Thursday for the Christmas holidays. Stock markets in the US and many global markets will be shut Friday in observance of the holiday.
Market Moves
Stocks
- Futures on the S&P 500 Index decreased 0.2%.
- The Stoxx Europe 600 Index gained 0.8%.
- The MSCI Asia Pacific Index sank 1%.
- The MSCI Emerging Markets Index dipped 0.6%.
Currencies
- The Dollar Index gained 0.1 to 90.26%.
- The euro decreased 0.3% to $1.2207.
- The British pound fell 0.3% to $1.3428.
- The onshore yuan was little changed at 6.547 per dollar.
- The Japanese yen weakened 0.1% to 103.38 per dollar.
Bonds
- The yield on 10-year Treasuries sank two basis points to 0.92%.
- The yield on two-year Treasuries fell less than one basis point to 0.12%.
- Germany’s 10-year yield declined two basis points to -0.60%.
- Japan’s 10-year yield decreased less than one basis point to 0.01%.
- Britain’s 10-year yield dipped less than one basis point to 0.202%.
Commodities
- West Texas Intermediate crude declined 1.8% to $47.09 a barrel.
- Brent crude dipped 1.7% to $50.06 a barrel.
- Gold weakened 0.3% to $1,870.97 an ounce.