Treasury yields fall for the third day,
Market anomalies remain
Bitcoin trades lower
Futures contracts on the Dow, S&P, NASDAQ and Russell 2000 tracked a rally in European equities on Thursday as investors appeared to shrug off additional indications of rising inflation and instead focus on positive corporate earnings results.
Gold continued to trade higher.
Global Financial Affairs
US futures extended a rebound after underlying gauges ended a three-day decline. It’s noteworthy that contracts on the Russell 2000 and the NASDAQ 100 outperformed futures on the S&P 500 and Dow Jones index.
We have been pointing out such anomalies in recent days. Yesterday, the same two outperformed despite concerns that inflationary pressure will dent the post-pandemic recovery. The sentiment seems to suggest that solid corporate earnings results are outweighing inflation worries.
In Europe, the STOXX 600 Index traded higher driven by the technology and mining sectors. Semiconductor stocks also outperformed amid a global hunger for chips, as manifested by Taiwan Semiconductor Manufacturing (NYSE:TSM), a Taiwanese chipmaker, which posted a 13.8% increase in quarterly profits.
Most of the markets in Asia were higher. The MSCI Asia Pacific excluding Japan rose 0.5%, South Korea’s KOSPI outperformed, adding 1.5%, closely followed by Japan’s Nikkei 225’s 1.46% climb. China’s Shanghai Composite retreated 0.1%, making it the only major regional index to close in the red, with property shares extending a selloff amid the Evergrande (HK:3333) fallout.
Economic data from China shows persistent inflation there. The annual producer prices rose in September at the quickest rate ever. This latest data was on the heels of data from the US on Wednesday which showed another strong increase in American consumer prices last month, coupled with the minutes from September’s Federal Reserve meeting in which members expressed rising anxiety about inflation.
Treasury yields on the 10-year note fell for the third straight day, as investors’ risk appetite grew.
10-year Treasuries Daily
The decline followed an Evening Star, a three-day reversal pattern. Rates are falling to the 200-DMA which may repeat a support. Such a patter could be the making of a H&S top. Meanwhile, the RSI is demonstrating weakening momentum, as it threatens a double top.
The dollar dropped for the second day, tracking falling yields.
Dollar Index Daily
The greenback failed to blow out a bullish pennant. The next test will be the lower half of the 93 levels, where a H&S top, which failed to provide bulls with the impetus to complete a massive double bottom, was situated. Meanwhile, the RSI peaked out with its own H&S top.
Gold, boosted by falling yields and a weakening dollar, rose for the third straight day.
The price finally completed a small H&S bottom. However, it appears to have found resistance below the 200-DMA, as well as the RSI. The small H&S makes up the right shoulder of a larger H&S bottom.
Bitcoin fell off daily highs, giving up the $58,000 level, which it visited earlier today for the first time since early May.
If prices close at these levels, the candle will have completed a bearish Shooting Star, which could also turn out to be the head of a small H&S top. The RSI is also showing signs of topping out.
Oil returned to its rally and traded above $81 for the first time since 2014.
Crude Oil Daily
On Friday, Goldman Sachs (NYSE:GS). reports Q3 earnings.
University of Michigan consumer sentiment is printed on Friday.
On Friday US retail sales are published.
The STOXX 600 rose 0.6%
Futures on the S&P 500 rose 0.5%
Futures on the NASDAQ 100 rose 0.7%
Futures on the Dow Jones Industrial Average rose 0.4%
The MSCI Asia Pacific Index rose 0.6%
The MSCI Emerging Markets Index rose 0.6%
The Dollar Index fell 0.1%
The euro rose 0.1% to $1.1606
The Japanese yen was little changed at 113.36 per dollar
The offshore yuan was little changed at 6.4332 per dollar
The British pound rose 0.2% to $1.3691
The yield on 10-year Treasuries was little changed at 1.54%
Germany’s 10-year yield was little changed at -0.13%
Britain’s 10-year yield advanced one basis point to 1.10%
WTI crude rose 1%
Gold was up 0.1%