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Opening Bell: Futures Up On Economic Optimism, Europe Shares Down

Published 03/25/2021, 09:40 AM
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  • Positive economic outlook from Powell and Yellen
  • German COVID cases surge
  • China tensions escalate with US and Europe
  • Key Events

    US futures on the Dow, S&P, NASDAQ and Russell 2000 climbed higher in trading ahead of the US session on Thursday after Washington’s upbeat view on the US economic recovery was affirmed by the Biden administration. But stocks in Europe were lower amid uncertainty on the recovery there as coronavirus cases spike in Germany, France and Poland. 

    Bitcoin and gold were lower. 

    Global Financial Affairs

    All four US futures were in the green—in contrast to the European decline after yesterday’s positive outlook from Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen. Both sides of the reflation trade—contracts on the tech heavy-NASDAQ 100 and small caps on the Russell 2000 were outperforming. Value stocks in American domestic firms, however, doubled the gains of growth shares in the biggest tech companies.

    The cyclical rotation also reversed in Europe on the news of extended lockdowns and as the EU prepares to block exports of the AstraZeneca (NASDAQ:AZN) vaccine to other countries in favor of its own member states. The STOXX 600 Index edged lower driven by oil and gas and retail stocks, which suffer when people stay at home, and banks, as the ongoing closed economy is expected to ensure rates remain low and financial transactions are reduced.

    Investors have been buying German 10-year bunds, pushing yields lower for the fifth day in a row, as it recorded its largest increase in virus cases since Jan. 9.

    German 10-year Daily

    The yield is on the verge of bottoming out.

    Regional woes were exacerbated with another diplomatic crisis. The EU and US sanctioned China on human rights violations and the SEC warned it might delist some of the biggest Chinese firms from US exchanges, driving Chinese tech shares lower.

    But the tension is not only between the largest global economies. Sweden's H&M (ST:HMb) stock also declined after Chinese online retailers stopped ordering the retailers products following a social media backlash to the fashion chain's refusal to buy Xinjiang cotton.

    Adidas (OTC:ADDYY) was also hit by a Chinese boycott, dropping more than 4%.

    ADSGN Daily

    Shares in the sports apparel retailer crossed the 200 DMA for the first time since climbing over it in August, threatening a top.

    In London, movie-theater chain, Cineworld Group (LON:CINE) slumped 10.5%, after it posted its first annual loss of $3 billion for 2020, and said it will seek approval from shareholders to increase its debt ceiling.

    Shares in Asia were mixed after Wednesday's Chinese tech company selloff on Wall Street. Stocks on the CSI 300 and the Hang Seng were in the red, but only slightly, about 0.1% down. Japan’s Nikkei 225 outperformed, rising 1.1%, with paper & pulp, railway & bus and real estate.

    On Wednesday, US stocks on both sides of the reflation trade tumbled. In mirror image to today’s futures, the Russell 2000 underperformed, falling 2.35%, while the NASDAQ 100 declined by half, 1.7%.

    Still,  American domestic stocks, energy producers, banks and transportation shares all performed better than tech firms, suggesting value stocks had an advantage over growth companies.

    Yields on the 10-year Treasury note struggled amid a rebound, during a technically sensitive juncture.

    10-year Treasuries Daily

    After Wednesday’s down gapping High Wave doji following a long, red candle, having neared the uptrend line, if today’s candle is green and digs deeply into Tuesday’s price action, it will complete an Evening Star.

    The dollar extended a rally to its third straight day, or to its fifth out of six days.

    Dollar Index Daily

    The recovery confirms the bullish nature of the preceding flag, which strengthened the view for a double bottom, rising out of the falling wedge since the March top.

    Gold fell on dollar strength.

    Gold Daily

    The yellow metal completed a bearish flag.

    Bitcoin investors have received mixed signals over the last few days. Tesla (NASDAQ:TSLA) CEO Elon Musk tweeted that you can now buy a Tesla with Bitcoin, while Ray Dalio, a founding partner of Bridgewater Associates, the world’s largest hedge fund, said there is “good probability” that the cryptocurrency will be outlawed, while Fidelity has applied to start a fund that tracks cryptocurrencies.

    Bitcoin Daily

    Meanwhile, Bitcoin hangs on the edge of the technical knife. It found support and has been struggling at the bottom of a bullish flag. 

    WTI retreated after a surge during a blockage of the Suez Canal.

    WTI Daily

    We expect the decline to be technical, as the resistance of a blown out flag, with the price finding this resistance for the fifth day along side the angle of the failed pattern.

    Up Ahead

    Market Moves

    Stocks

    Currencies

    • The Dollar Index rose 0.1% to 92.70
    • The euro was unchanged at $1.1813.
    • The British pound gained 0.1% to $1.3697.
    • The onshore yuan weakened 0.1% to 6.534 per dollar.
    • The Japanese yen weakened 0.4% to 109.12 per dollar.

    Bonds

    • The yield on 10-year Treasuries advanced two basis points to 1.62%.
    • The yield on two-year Treasuries decreased less than one basis point to 0.14%.
    • Germany’s 10-year yield dipped one basis point to -0.37%.
    • Japan’s 10-year yield gained one basis point to 0.086%.
    • Britain’s 10-year yield sank two basis points to 0.738%.

    Commodities

    • West Texas Intermediate crude declined 1.5% to $60.24 a barrel.
    • Brent crude dipped 1.2% to $63.61 a barrel.
    • Gold weakened 0.1% to $1,733.01 an ounce.

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