- Dollar suffers worst quarter in over three years
- US equites rally on Wall Street
- Speculation on stimulus is Thursday's biggest global equities driver
Key Events
Expectations that US lawmakers would reach an agreement on a new economic stimulus package helped European markets and US futures open higher on Thursday. Contracts on the Dow, S&P, NASDAQ and Russell 2000 are all trading in positive territory. However, oil is down over 1% as the outlook for demand worsened, while gold has benefited from dollar weakness.
Global Financial Affairs
US futures are being supported by speculation that bargaining positions between the Congressional Republicans and Democrats have narrowed following additional assistance from Treasury Secretary Steven Mnuchin who raised the offer previously presented by Republicans. This meant House Democrats delayed their vote on the stimulus package as Speaker, Nancy Pelosi said she was seeking "further clarification" on the offer.
Contracts were up at least 1.3% on the NASDAQ and as much as 0.8% on the SPX.
The Stoxx Europe 600 Index was also boosted by positive results from Swedish retailer H&M (ST:HMb) and French-Italian chipmaker STMicroelectronics (PA:STM) which sent shares in both companies higher. While shares of German pharma giant Bayer (DE:BAYGN) dropped after it announced further cost cuts and impairment charges.
Asian bulls drove regional markets higher on Thursday morning. Speculation that the US will deliver more stimulus found little resistance in thin holiday trading. South Korea’s KOSPI jumped 0.9%, after posting a merchandise trade surplus of $8.88 billion in September. Australia’s ASX 200 closed up almost 1%, ending a three day slide, after Prime Minister Scott Morrison eased fears of a second pandemic wave, saying his country will reopen its border with New Zealand “very soon.” Also, the latest release showed Australia’s manufacturing PMI climbed to 55.4 from 53.6 in August.
Tokyo's stock exchange was closed on Thursday due to a technical glitch which halted equity trading.
The end of third quarter on Wednesday saw US stocks close in the green, but they were well off their highs amid choppy trading. The S&P 500 gave up 1.7% gains, locking in 0.8% added value.
Technically, the benchmark formed a shooting star, confirming resistance of a bearish flag, signaling the corrective rally is over and the short-term downtrend will persist.
Risk-on pushed yields, including for the 10-year Treasury note, to a second day rise.
However, rates are still in play for a H&S top, with the 50 DMA acting as a natural neckline.
The dollar fell for the fourth day, adding to its worst quarter in over three years.
Greenback volatility resumed for the second day, as the currency is being squeezed between short-term bulls, projected by the bottom formation and the 50 DMA, and long-term bears, represented by the falling channel and the 100 DMA.
Dollar weakness fueled a continued gold rally, trimming Wednesday’s losses—as the yellow metal struggles within its short-term downtrend
The contract completed a bearish symmetrical triangle that pushed prices below their uptrend line since the March bottom. The precious metal registered its worst month since November 2016 on the preceding dollar rally, but at the same time, its long-term uptrend, tallying an 8th quarterly gain, is its longest winning quarterly streak in ten years.
Oil gave up gains, retreating below the $40 mark, even as US stockpiles posted a surprise decline. At first, it seemed that drawdown would outweigh the worsening demand outlook, but the fall again below the psychological $40 level dispels that notion.
Bulls will have a hard time propping up prices when a 7-day MA of worldwide commercial flights dropped to its lowest since mid-August.
The trading pattern still fits either a pennant or rising flag, continuation patterns, suggesting the Sept. 9 rebound from near $36 would resume. However, this two-week supply-demand domino is moving against a rising wedge, a three-month pattern—suggesting a potential six times greater interest, giving bears a one-sided advantage.
Up Ahead
- Key European economies, including Germany and France are reporting PMI data on Thursday.
- US initial jobless claims and continuing claims are due Thursday.
- The September US nonfarm payrolls report on Friday will be the last before the November election.
Market Moves
Stocks
- The Stoxx Europe 600 Index climbed 0.6%.
- Futures on the S&P 500 Index gained 0.8%.
- NASDAQ 100 Index futures increased 0.7%.
- The MSCI Emerging Markets Index rose 0.4%.
Commodities
- The Dollar Index dipped 0.05, paring a 0.2 decline%.
- The British pound climbed 0.1% to $1.2932.
- The Japanese yen was little changed at 105.49 per dollar.
- The offshore yuan strengthened 0.6% to 6.7411 per dollar.
Bonds
- The yield on 10-year Treasuries climbed one basis point to 0.70%.
- Germany’s 10-year yield rose one basis point to -0.51%.
- Britain’s 10-year yield increased two basis points to 0.244%.
- New Zealand’s 10-year yield gained two basis points to 0.536%.
Commodities
- West Texas Intermediate crude climbed 0.1% to $40.27 a barrel.
- Gold strengthened 0.7% to $1,898.14 an ounce.
- Silver strengthened 2.3% to $23.77 per ounce.
- Iron ore fell 0.1% to $117.02 per metric ton.