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Opening Bell: Shanghai Index Rises, Futures Waver, Global Stocks Sell Off

By Investing.com (Pinchas Cohen/Investing.com)Market OverviewFeb 10, 2020 07:15AM ET
www.investing.com/analysis/opening-bell-shanghai-index-rises-futures-waver-global-stocks-sell-off-200505976
Opening Bell: Shanghai Index Rises, Futures Waver, Global Stocks Sell Off
By Investing.com (Pinchas Cohen/Investing.com)   |  Feb 10, 2020 07:15AM ET
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  • China’s Shanghai Index was the sole Asian benchmark showing gains today, likely due to government stimulus

  • China based tech companies continue to remain idle
  • Oil barely hovers above $50
  • Key Events

    Earlier today, U.S. futures followed global stocks lower as the still-spreading coronavirus stoked mounting fears of the disease and its impact on world-wide economic growth.

    Nevertheless, safe havens such as Treasurys and the yen were lower too, though gold moved higher as the dollar weakened. Bitcoin plunged.

    Global Financial Affairs

    All four major U.S. future indices—for the S&P 500, Dow Jones, NASDAQ and Russell 2000—slumped this morning, though currently they're wavering, having trimmed most of the day’s losses.

    SPX Futures Daily
    SPX Futures Daily

    Contracts suggest the underlying benchmarks will extend their Friday selloffs when Wall Street begins trading, confirming existing bearish signals. Media and travel firms pulled the STOXX Europe 600 Index to a lower open.

    While just about all Asian indices closed with losses today, ironically, it was China’s Shanghai Composite that was the sole green beacon, (+0.5%), in a regional sea of red. That's puzzling since China's economy is most directly impacted by the coronavirus.

    Equally baffling: Chinese shares are rising for the fifth straight session, even as global tech giants continue to face the chaos of their China-based suppliers still not being fully operational. Case in point—Zhengzhou-based Foxconn, the world’s leading maker of iPhone (NASDAQ:AAPL) components, is located just a few hundred miles from the virus's ground zero, Wuhan. Thus, even as Apple's primary supplier warned shareholders that the epidemic would keep its work force idle, thereby shutting down production, China’s leading index sees substantial, repeated gains.

    Similarly, the offshore yuan strengthened, even though its country of origin continues to face tremendous uncertainty as the virus' death toll climbed to 908 within China and the number of confirmed cases rose to 40,171. Reports indicate that "many doctors believe that deaths and infections from the current epidemic are [being] undercounted in China," due some say to the strain on health facilities; there are also mounting reports of mass coverups.

    We can only guess at the reasons for this market incongruity. Perhaps it's the Chinese government's resolve to provide a safety net in the form of ongoing liquidly. This bullish action seems to imply that investors can be assured that China cares about the economic cost of the current situation. So they're seeking profitable returns by joining the ride.

    Yields are up, including for the benchmark U.S. 10-year note, though well below their highs, suggesting the flight to Treasurys may need a breather before continuing, since indicators suggest yields reached oversold levels (overbought Treasurys) and flipped to a bullish posture.

    UST 10Y Daily
    UST 10Y Daily

    The 50 DMA increased its distance after finding resistance by the 200 DMA.

    The U.S. Dollar Index took a step back after a five-day straight rally, though the greenback strengthened vs the Japanese yen.

    Gold pushed higher for a fourth day.

    BTC/USD Daily
    BTC/USD Daily

    Bitcoin, however, dropped as much as 4%. The cryptocurrency is now 3% lower, falling back below the $10,000 level. Its overbought levels are turning around, suggesting an additional decline.

    Oil Daily
    Oil Daily

    Crude is attempting to remain above the psychologically critical $50 level despite extreme oversold conditions. Expectations for an OPEC-brokered production cut agreement with Russia as a way of bolstering sagging oil prices continue to fade.

    Up Ahead

    • Earnings season continues this week with reports from, among others: MGM Resorts (NYSE:MGM) and Cisco Systems (NASDAQ:CSCO) on Monday; SoftBank (OTC:SFTBY) on Wednesday; Thursday brings results from Alibaba (NYSE:BABA), Nissan (OTC:NSANY), Credit Suisse (NYSE:CS), Airbus (OTC:EADSY), Nestle (OTC:NSRGF) and American International Group (NYSE:AIG).
    • Federal Reserve Chairman Jerome Powell delivers his semiannual testimony in Congress on Tuesday and Wednesday; ECB President Christine Lagarde speaks at the European Parliament in Strasbourg Tuesday.
    • U.S. Core CPI is reported on Thursday. It’s anticipated to have increased to 0.2% in January, a faster pace than in December.
    • On Friday, China and the U.S. are expected lower tariffs on billions of dollars of respective imports, part of the Phase One trade deal signed last month.

    Market Moves

    Stocks

    Currencies

  • The Dollar Index fell 0.0.3%.
  • The British pound dipped 0.1%.
  • The euro was little changed at $1.0947.
  • The Japanese yen was little changed at 109.82 per dollar.
  • The offshore yuan strengthened 0.3% to 6.9865 per dollar.
  • Bonds

    • The yield on 10-year Treasuries fell less than one basis point to 1.58%.
    • Germany’s 10-year yield declined less than one basis point to -0.39%.
    • Britain’s 10-year yield climbed less than one basis point to 0.573%.

    Commodities

  • West Texas Intermediate crude fell 0.5% to $50.07 a barrel.
  • Gold edged up 0.1% to $1,572.42 an ounce.
  • LME nickel climbed 2% to $13,025 per metric ton.
  • Opening Bell: Shanghai Index Rises, Futures Waver, Global Stocks Sell Off
     

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    Opening Bell: Shanghai Index Rises, Futures Waver, Global Stocks Sell Off

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    Comments (1)
    Howl Jenkins
    Howl Jenkins Feb 10, 2020 8:40AM ET
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    how honestly awful is https://investing.com? China markets rose because the Chinese have restricted selling. There's nothing 'puzzling' about it. Honestly, can I apply for a job there? The bar is low.
    Pinchas Cohen
    Pinchas Cohen Feb 10, 2020 8:40AM ET
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    Hi Howl, and thank you for your feedback. Perhaps you can educate me about the mechanics of supply and demand. For example, how does the sequence of restricted selling raise prices? Thanks!
     
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