- US futures defy market mechanics to continue rising
- Precious metals shine
- Oil hovers below $42
Key Events
Gold jumped to an all-time high on Monday, hitting $1,943 earlier today, as Sino-US relations soured, with Secretary of State Mike Pompeo calling for "the end of engagement" between the two countries. Global and US coronavirus cases continued rising.
Despite the headwinds, US futures for the S&P 500, Dow Jones, NASDAQ and Russell 2000 all advanced, propelled by investors' continued outlook of a quick economic recovery.
Global Financial Affairs
Still, the story of the day is undoubtedly gold, which is making history, hitting a fresh all-time high for the first time in almost nine years. This event, along with near-record lows for yields, contradicts the apparent risk-on mood that would normally be signified by rising US futures, taking them to pre-Covid levels.
On Monday morning, all US contracts on major indices were up, paring last week’s losses, at least 0.4% for the Dow and the S&P, while those on the NASDAQ returned to outperformance, up 0.8%.
The Stoxx Europe 600 Index dropped in early trade, along with shares of EasyJet (LON:EZJ) and Ryanair Holdings (LON:RYA), after the UK decided to quarantine travelers returning from Spain.
During the Asian session, regional indices were mixed. Taiwan’s TPE jumped 2.3%, heading toward a record high, as shares of Taiwan Semiconductor Manufacturing (NYSE:TSM) surged 10%. Hong Kong’s Hang Seng underperformed, falling 0.41%.
Last week, US stocks fell for the first time in a month. They also pulled back from positive territory for the year, triggering bearish signals, as the US-China diplomatic spat reached its lowest point in decades, with some arguing it was now at a point of no return.
The S&P 500 Index produced a shooting star on Friday.
It followed Thursday’s hanging man, at the resistance of the Feb. 24 falling gap created by panic selling due to the COVID-19 pandemic. If the current rally doesn't beat the February record, odds would increase that the megaphone pattern since January 2018 will finally top out.
Yields, including for the benchmark 10-year Treasury, dropped, nearing record lows. But rates found their footing and are currently trading off session lows.
The dollar sold off today, for a seventh consecutive day.
The global reserve currency has been falling now for the sixth week in a row, to its lowest level since September 2018. It's now a hairsbreadth away from its lowest point since June 2018. However, it's still approaching the long-term uptrend line since 2011, which currently sits at 92.00.
Gold made its newest record-high in style.
That is, with a rising gap, signaling it was a market dominated only by buyers. The yellow metal's ascent continues for a seventh consecutive day, as well as for the eighth week in a row. The precious metal has now actualized a series of bullish patterns, which we've been noting for months.
In our view, today's developments for gold, compounded by yields heading toward all-time lows should give pause to equity bulls who appear to remain unstinting in embracing risk.
Bitcoin has been showing renewed signs of life.
The cryptocurrency climbed for the sixth day out of seven, as well as the second week in a row. However, it must prove itself by scrambling over the $10,510 resistance since August 2019. If it does, it will have completed a bottom.
Oil drifted above a symmetrical triangle.
It's now sitting on the support-resistance of the Mar. 9 falling gap that wiped out a quarter of the commodity’s value.
Up Ahead
- Earnings reports this week will include releases from three mega cap tech giants, Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), as well as from chipmaker Advanced Micro Devices (NASDAQ:AMD).
- The Federal Open Market Committee holds its policy meeting on Tuesday, with an announcement due on Wednesday.
- US second-quarter GDP is expected on Thursday.
- China PMI data is released on Friday.
Market Moves
Stocks
- The Stoxx Europe 600 Index dipped 0.4%.
- Futures on the S&P 500 Index rose 0.3%.
- Hong Kong’s Hang Seng Index decreased 0.3%.
- The MSCI Asia Pacific Index gained 0.7%.
Currencies
- The Dollar Index fell 0.5%.
- The euro increased 0.5% to $1.171.
- The British pound rose 0.2% to $1.282.
- The Japanese yen strengthened 0.6% to 105.47 per dollar.
- The USD/KRW strengthened 0.4% to 1,196.18 per dollar.
Bonds
- The yield on 10-year Treasuries declined one basis point to 0.58%.
- Germany’s 10-year yield decreased less than one basis point to -0.45%.
- France’s 10-year yield was unchanged at -0.147%.
- Britain’s 10-year yield dipped less than one basis point to 0.14%.
Commodities
- West Texas Intermediate crude fell 0.4% to $41.14 a barrel.
- Silver popped 6% to $24.13 per ounce.
- Gold strengthened 1.7% to $1,935.20 an ounce.