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Opening Bell: Risk Appetite Comes Roaring Back; Oil Rebounds; Gold, Yen Dip

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewFeb 04, 2020 07:05AM ET
www.investing.com/analysis/opening-bell-risk-appetite-comes-roaring-back-oil-rebounds-gold-yen-dip-200504249
Opening Bell: Risk Appetite Comes Roaring Back; Oil Rebounds; Gold, Yen Dip
By Investing.com (Pinchas Cohen/Investing.com)   |  Feb 04, 2020 07:05AM ET
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  • Additional Chinese stimulus, strong U.S. data spur investors
  • China shares rebound after yesterday's market plunge
  • Oil entered a bear market yesterday after it completed a 21% decline from its $63.27 high
  • Key Events

    U.S. index futures and European stocks followed Asian indices higher this morning as risk appetite vigorously returned to markets. Contracts for the S&P 500, Dow Jones and NASDAQ are seeing robust gains on Tuesday, in the aftermath of a rebound in Chinese stocks which, on Monday, experienced their worst selloff since 2015.

    Haven assets, including Treasurys, gold and the yen dropped. The dollar strengthened.

    Global Financial Affairs

    This morning, global investors were looking to buy, and they were hungry. However, it's not clear if this is a dead cat bounce—when the market falls so fast that a rebound is inevitable given such market mechanics as portfolio repositioning and preset algorithmic trading; or whether, in fact, what's going on right now is institutional dip-buying after panic selling by the crowd—making it meaningful to the trend.

    It’s too early to tell, though, since prices are at an intersection, meaning they can go either way.

    Nonetheless, for a second day, U.S. futures rebounded, as the spreading coronavirus was overshadowed by additional efforts from China to pump more stimulus into stabilzing the country's economy.

    S&P 500 futures jumped back into a rising flag today, whose upside breakdown signals a resumption of the previous downturn.

    SPX Futures Daily
    SPX Futures Daily

    Note that the flag’s body is right on the uptrend line since the October low, underscoring how crucial this price level and the next move could be for the trend.

    Chemicals and mining firms led the STOXX Europe 600 Index. BP (LON:BP) surged, gaining 4%, after management raised its dividend payout by 2.4%, which helped the global energy major buck the current oil market selloff.

    BP Daily
    BP Daily

    From a technical perspective, the advance, however impressive, is nothing more than an upward correction within an obvious downtrend.

    Asian markets were all green. All major exchanges, except for New Zealand’s Dow Jones, (-0.39%), rallied. South Korea’s KOSPI outperformed, (+1.84%). After yesterday's record breaking $720 billion wipeout, China’s Shanghai Composite rebounded, (+1.34%).

    On Monday, during the Wall Street session, equities came back from their worst weekly performance in six months, on news of global efforts to contain the epidemic's spread. Also helping the mood: better-than-expected U.S. manufacturing data. Tech shares outperformed while Industrial and Energy sector shares lagged.

    Today's durable goods release will be eyed to see if the economic news continues to signal growth. As well, corporate results from Ralph Lauren (NYSE:RL), ConocoPhillips (NYSE:COP) and Clorox (NYSE:CLX) are on the docket before the market open.

    Treasurys dropped in favor of equities.

    UST 10Y Daily
    UST 10Y Daily

    The yield on the 10-year Treasury note jumped at the top of the session, to finish slightly above yesterday’s intraday highs. While the RSI suggests there is plenty of room for an upward move, bouncing off the support of the broken downtrend line since the November 2018 high, rates have a long way to go in order to return back above the violated uptrend line since the August bottom, or to at least form two rising peaks and troughs. The 50 DMA is falling away from the 200 DMA.

    Despite the sovereign bond selloff, the dollar advanced for a second day, although it's now off its highs.

    AUD/USD Monthly
    AUD/USD Monthly

    The Australian dollar rebounded from the lowest levels since March 2009, after the country’s central bank held rates steady while underscoring the influence of previous cuts, saying it's too early to know what effect the deadly virus will have on the Aussie and global economies. If the AUD falls below the 0.6670 level, it would target the 0.6000 level.

    Fears the coronavirus would smother energy demand as the global economy shrinks, yesterday pushed oil below the crucial $50 level, thereby completing a 21% reversal from the January high, putting the commodity in a bear market.

    WTI Daily
    WTI Daily

    Currently, WTI is back above $51, fighting to stay above water. Tthe $50 support level will soon meet with the uptrend line since the February 2016 bottom of $26.05.

    Up Ahead

    • The U.S. Democratic Party will release results from the Iowa caucuses on Tuesday, the opening event of its nomination race for the presidency.
    • Final eurozone PMI data will be reported Wednesday.
    • The Reserve Bank of India’s interest rate decision is due Thursday.
    • The U.S. nonfarm payrolls report for January is scheduled for Friday release.

    Market Moves

    Stocks

    Currencies

  • The Bloomberg Dollar Spot Index increased about 0.1%.
  • The British pound dipped 0.2% to $1.2966.
  • The euro was little changed at $1.1058.
  • The Japanese yen weakened 0.2% to 108.96 per dollar.
  • The offshore strengthened 0.3% to 6.9907 per dollar.
  • Bonds

    • The yield on 10-year Treasuries increased three basis points to 1.56%.
    • Germany’s 10-year yield rose two basis points to -0.42%.
    • Britain’s 10-year yield gained three basis points to 0.543%.

    Commodities

  • West Texas Intermediate crude advanced 1% to $50.61 a barrel.
  • Spot gold fell 0.3% to $1,571.31 an ounce.
  • Copper futures surged 2.4% to $5,659.50 per metric ton
  • Opening Bell: Risk Appetite Comes Roaring Back; Oil Rebounds; Gold, Yen Dip
     

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    Opening Bell: Risk Appetite Comes Roaring Back; Oil Rebounds; Gold, Yen Dip

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    Comments (1)
    Andrew carson
    Andrew carson Feb 04, 2020 7:35AM ET
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    Sounds like a bull trap.
     
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