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Opening Bell: U.S. Futures, European Stocks Extend Records; Gold, Oil Advance

Published 01/04/2022, 08:47 AM
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  • Traders are betting on positive US manufacturing and jobs figures
  • Cyclicals lead in the US and Europe
  • Bitcoin continues struggling
  • Key Events

    On Tuesday, futures on the Dow Jones, S&P 500, NASDAQ and Russell 2000 indices as well as stocks in Europe extended the new year rally ahead of key US data releases—manufacturing and new jobs. The rise suggests that traders are betting that the numbers will show that the world's largest economy is unfazed by the latest, fast-spreading Omicron variant of COVID-19.

    The dollar was flat and yields fell slightly.

    Global Financial Affairs

    All four US futures were green with the S&P 500 and Dow futures slightly in the lead, building on Monday's new record closes.

    The same cyclicals leadership seen in US futures is also evident in Europe today, with airlines, retail, and commodities leading the STOXX 600 index to a back-to-back record. The pan-European benchmark was up 0.6% at the time of writing, and hit an all-time high on an intraday basis as well.

    In London, the FTSE 100 opened more than a full percentage point higher to a near-two-year peak, also boosted by airlines. IAG (LON:ICAG), the owner of British Airways, opened 7.9% higher and extended gains to 9.9%

    Excluding China, all Asian benchmarks were in positive territory. Japan's Nikkei 225 surged 1.8% on the country's first trading day of the year whereas China's Shanghai Composite slid 0.2% as real estate developer Evergrande (HK:3333) was back in the headlines.

    The company was ordered to demolish a resort in the southern province of Hainan. Shares of Evergrande were suspended yesterday during Hong Kong trading, however, the stock was back in play today and gained 1.9%. Increased regulations surrounding China's real estate industry induced fears of potential defaults and a financial crisis so it's ironic that the perpetrator rallies while the broader market stumbles.

    In the US on Monday, shares started the year on an optimistic note, with both the S&P 500 and the Dow Jones notching fresh records. However, it's essential to keep in mind that trading volume is still light and we cannot bank on these moves as trendsetting. As well, though 2021 was stellar and 2022 started strong, an array of risks still linger.

    While the S&P 500 and Dow Jones set records, the NASDAQ 100 and the Russell 2000 gained almost twice as much. The former closed 0.4% below its Dec. 27 record, while the small cap index remained 7.5% below its highest close, offering investors the most value of the indices.

    Yields on the 10-year Treasury note retreated. Any concerns on economic growth may curb a rise in yields.

    The dollar was little changed.

    Dollar Index Daily

    Our ascending or symmetrical triangles have turned into a rectangle, signifying that anything goes. Still, there is a strong chance the breakout would resume the underlying trend. Since the sideways pattern emerged within an uptrend, it's more likely than not that the escape will be topside, but it requires an actual breakout to officially call it a resumption.

    Gold rallied.

    Gold Daily

    The yellow metal found support by the 200 DMA so now there is a natural neckline to a possible Rounding Bottom. The outlook for prices remains mixed.

    Bitcoin continues to struggle as it tries to push back above $50,000.

    Bitcoin Daily

    The cryptocurrency remains below the 200 DMA, the natural neckline for a massive H&S that could be the right shoulder of an even larger double top.

    Oil rose for a second day, ahead of the first OPEC+ meeting of the year today, where the cartel and its cohorts will talk about output levels.

    Oil Daily

    The rise is at the top of a bearish wedge, a potential right shoulder of an H&S top.

    Up Ahead

    Market Moves

    Stocks

    • The STOXX 600 rose 0.5%
    • Futures on the S&P 500 rose 0.2%
    • Futures on the NASDAQ 100 rose 0.2%
    • Futures on the Dow Jones Industrial Average rose 0.2%
    • The MSCI Asia Pacific Index rose 0.9%
    • The MSCI Emerging Markets Index rose 0.2%

    Currencies

    • The Dollar Index added less than 0.1%
    • The euro was little changed at $1.1292
    • The Japanese yen rose 0.57% to 115.97 per dollar
    • The offshore yuan was little changed at 6.3776 per dollar
    • The British pound rose 0.12% at $1.3486

    Bonds

    • The yield on 10-year Treasuries was little changed at 1.63%
    • Germany's 10-year yield declined two basis points to -0.14%
    • Britain's 10-year yield advanced six basis points to 1.03%

    Commodities

    • WTI crude rose 0.5% to $76.455 a barrel
    • Brent crude rose 0.9% to $79.66 a barrel
    • Spot gold rose 0.14% to $1,804.05 an ounce

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