- Russell 2000 futures point to resumption of Reflation Trade
- Oil’s improving demand outlook has reversed its technical trajectory
Key Events
Shares in Europe followed US contracts for the Dow Jones, S&P 500, NASDAQ and Russell 2000 higher on Monday after strong earnings last week boosted bullish sentiment along with improving economic prospects, offsetting concerns of rising inflation and higher taxes in Europe. The UK market is closed today for a bank holiday.
This morning, all four major US futures were in the green, with the reflation trade appearing to be back on track. Contracts on the Russell 2000 outperformed, including by 3:1 for those on the NASDAQ 3:1 at time of writing.
The dollar was flat but gold gained.
Global Financial Affairs
Consumer products and technology stocks buoyed the STOXX Europe 600 Index which was up as much as 0.6% earlier this morning, snapping a four day decline. Slowing the advance was Siemens Gamesa Renewable Energy (F:GAM) after Citi wrote the company’s guidance disappointed.
The pan-European benchmark has gained 10% so far this year, supported by economic recovery hopes across the region accelerated by vaccines and ultra-loose fiscal and monetary policy. Restarting growth has been overshadowing a double-dipped contraction. The outlook is the most optimistic since COVID disrupted the free flow of the continental economy.
Still, geopolitics and the coronavirus resurgence in some developing countries has kept investors cautious, stalling momentum in the last couple of weeks since the primary European benchmark hit its Apr. 19 all-time high, ten sessions after the index surpassed its pre-pandemic, Feb. 19 record high.
From a technical perspective, the STOXX 600 looks ready for new highs.
The price bounced off the bottom of a continuation pennant pattern, which was a rest-stop after the price beat the Feb. 19 record. This also coincided with the uptrend line since the Nov. 2 bottom. A topside breakout would target the 450.00 level.
Earlier Monday, Asian stocks declined in a sluggish session with the Tokyo and Shanghai exchanges closed for holidays. Regional shares seemed to track Friday’s Wall Street decline while missing out on today’s advances by US futures and European shares. Hong Kong’s Hang Seng underperformed, falling 1.4%
US stocks fell from a record on Friday after Robert Kaplan, president of the Dallas Fed, broke ranks with Fed Boss Jerome Powell, saying he wants to talk about tapering and has a shorter view for rising interest rates.
The dollar was little changed on Monday, but gold pushed higher.
The precious metal is struggling against the top of a falling flag. An upside breakout would add fuel to the preceding flag that helped complete a double-bottom, as the price heads toward the top of a falling channel.
Bitcoin appears to be trading along a sharply rising flag, bearish after completing a rising wedge, whose downside breakout will return the price toward the $40K levels. Has the cryptocurrency's parabolic move gone too far?
Oil rebounded from a decline to a small gain.
The rebound occurred at the top of a blown out, descending triangle, as the outlook for demand reversed with optimism of the reflation trade amid a reopening economy. All of which overshaded concerns of the lingering virus and earlier worries about a US green initiative.
Up Ahead
- ISM Manufacturing PMI data is released today in the US.
- The Reserve Bank of Australia monetary policy decision is due Tuesday.
- The Bank of England's rate decision is expected on Thursday.
- US April employment figures are released on Friday.
Market Moves
Stocks
- S&P 500 futures rose 0.5%
- Australia’s S&P/ASX 200 was little changed
- South Korea’s KOSPI fell 0.8%
- Hong Kong’s Hang Seng Index fell 1.4%
Currencies
- The Japanese yen was at 109.63 per dollar, down 0.3%
- The offshore yuan was at 6.4798 per dollar
- The Dollar Index dipped 0.15%
- The euro traded at $1.2022
Bonds
- The US 10-year Treasury yield is up 0.90%
- Australia’s 10-year bond yield was little changed at 1.76%
Commodities
- West Texas Intermediate crude fell 0.6% to $63.20 a barrel
- Gold was at $1,774.25 an ounce, up 0.3%