US investors unnerved by Fed leadership uncertainty
European shares rally on easing of US/China tensions
Gold’s upward move continues
Futures on the Dow, S&P, NASDAQ and Russell 2000 were slightly in the green on Tuesday despite continued nervousness on the future leadership of the US Federal Reserve and any impact that could have on monetary policies. Meanwhile European stocks hit a record in trading this morning ahead of the US session open.
Bitcoin’s recent rally ended and the cryptocurrency is back below $60,000.
Global Financial Affairs
As noted in Sunday’s Week Ahead post, the focus this week will be on the US consumer. Today US retail sales data could show an acceleration as industry giants including Walmart (NYSE:WMT) and Home Depot (NYSE:HD) release better than expected quarterly results.
European investors, who, unlike US investors, are free of concerns regarding central bank leadership, bid up stocks in the region on signs of easing geopolitical tension between the US and China, the world’s two largest economies. The STOXX 600 Index climbed, extending a string of records to the fifth day. This rally has seen the index increase for 16 out of the last 18 sessions.
The critical meeting between President Joseph Biden and Chinese leader Xi Jinping, during which both leaders signalled willingness to stabilize their countries’ relations, raised investors’ hopes. It also helped that European Central Bank (ECB) President Christine Lagarde confirmed she would not be tightening monetary policy, ending speculation that the ECB would do so.
European mining stocks, which have significant exposure to China, climbed 0.5% in early trading, while Vodafone’s (LON:VOD) 6.3% gain after it reported strong results boosted telecom stocks.
Dutch e-commerce operator, Prosus (AS:PRX) rose 4.0% after reporting higher profit for the first half of 2022 as it earned $12.3 billion from selling part of its stake in Tencent Holdings (OTC:TCEHY).
Earlier Tuesday, Asian benchmarks were mixed, with China’s Shanghai Composite down 0.3% despite data showing October retail sales growth was stronger than expected due to robust sales ahead of China’s Singles Day shopping festival.
Hong Kong’s Hang Seng jumped 1.3%; Japan’s Nikkei gained 0.1%
On Monday, stocks on Wall Street struggled for clear direction amid heavy volatility in Tesla (NASDAQ:TSLA) stock. As well, Treasuries sold off.
The S&P 500 managed to trim losses as Tesla rebounded off session lows. Shares in the EV manufacturer, having shed almost 20% of their value, are now on the brink of an official bear market. The tumble followed a Twitter spat between the company’s CEO, Elon Musk and Senator Bernie Sanders in which Musk mentioned selling more stock.
The 10-year Treasury note erased yesterday’s selloff, allowing yields to rise to 1.6% after speculation that the Fed may speed up the reduction of its asset purchasing after the fastest jump in inflation in three years.
The Dollar Index fluctuated between gains and losses.
The greenback struggled to extend a rally against the top of its rising channel.
Gold advanced for the eighth day out of nine.
The yellow metal has completed a H&S bottom.
Cryptocurrencies slumped as Twitter CFO, Ned Segal ruled out crypto investment. The news saw Bitcoin slide towards $60,000.
If the leading cryptocurrency falls below $57,700, it will increase the odds of the token retesting the bottom of a rising channel. A close at the current price may signal a failure of its pennant.
Oil rose as investors wait to see if the Biden administration will tap crude reserves to help reduce prices at US gas pumps.
Crude Oil Daily
A fall below $78 may signal a top in the price.
US housing starts are released on Wednesday.
On Thursday, initial jobless claims figures are published.
The Fed’s Richard Clarida speaks at the Asia Economic Policy Conference on Friday.
The STOXX 600 rose 0.2% as of 9:24 a.m. London time
Futures on the S&P 500 fell 0.1%
Futures on the NASDAQ 100 were little changed
Futures on the Dow Jones Industrial Average were flat
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1362
The Japanese yen was little changed at 114.18 per dollar
The offshore yuan was little changed at 6.3777 per dollar
The British pound rose 0.4% to $1.3466
The yield on 10-year Treasuries was little changed at 1.61%
Germany’s 10-year yield was little changed at -0.23%
Britain’s 10-Year yield was little changed at 0.97%
Brent crude rose 0.5% to $82.42 a barrel
Spot gold rose 0.5% to $1,872.95 an ounce