Futures, Asian shares start the week mixed
Gold, silver trim gains, even as dollar climbs for a second day
Oil jumps on hopes for improved demand
US futures for the Dow Jones, S&P 500, NASDAQ and Russell 2000 were mixed on Monday, while European shares failed to advance after better-than-expected Chinese data showed factory prices had fallen less than anticipated. US-China tensions continue in the aftermath of President Donald Trump’s threat last week to ban TikTok and WeChat in the US.
As well, even after Trump’s executive orders on tax relief and stopgap employment benefits were issued on Saturday, markets await some resolution to the Congressional stalemate currently holding back any official bills on additional coronavirus relief in the US.
Yields rose, the dollar was flat and silver kept pushing higher.
Global Financial Affairs
Contracts on US major indices, which had climbed during the Asian session this morning, fell as European markets opened even though some regional stocks surged higher.
European stocks opened higher but were later pushed off session highs, a sign of conflicting opinions as to the market’s direction. The Stoxx Europe 600 Index initially climbed along with energy firms as oil advanced after the CEO of Aramco (SE:2222) yesterday announced demand will rise in Asia.
NASDAQ futures were in the red, and remain so at time of writing, extending Friday’s underperformance as the tech industry continues in the crosshairs of the world’s two largest economies. Still, some funds already consider the tech selloff a buying dip.
This morning’s regional gains were attributed to ongoing hopes for additional stimulus and Friday’s better-than-expected US jobs data. The notable exceptions were Hong Kong’s Hang Seng which underperformed, (-0.5%), after authorities arrested pro-democracy media mogul Jimmy Lai on charges of national security offenses. It was the most high-profile action so far under the autonomous territory’s new national security law.
Australia’s ASX 200 advanced to a three-week high, (+1.75%), providing the best results in Asia, boosted by banks and consumer stocks.
Friday’s close in the US produced a weekly advance across all indices, but produced a divergence between tech shares, which fell during the final day of trade last week, and smaller, domestic firms which rallied on jobs growth.
Yields, including for the 10-year Treasury, reached their highest level since late-July.
But rates found resistance near the top of falling channel, producing a shooting star.
The dollar edged higher, extending its advance for a second day, the first time in a week.
The global reserve currency is trading between a falling channel since May and the bottom of a rising channel since 2011.
Gold pared Friday’s selloff.
The yellow metal formed a major Bearish Engulfing pattern that overwhelmed the preceding two green candles. While the lagging MACD has yet to trigger a bearish cross, both momentum-based indicators, the RIS and ROC, had already done so. We’re betting today’s advance is part of the post-bearish pattern, retesting its integrity, before resuming a deeper pullback.
We’ve gone on record recommending silver in lieu of gold; the chart below helps illustrate why:
Notice that silver’s selloff on Friday only produced a Dark Cloud Cover, much less potent than Gold’s Bearish Engulfing pattern that swallowed up two days worth of gains. Also, the momentum indicators have not topped out yet, unlike those of the yellow metal.
Bitcoin climbed to the highest point since Aug. 8, 2019.
This occurred after the cryptocurrency completed a massive H&S bottom—in play from February to July. However, beware of negative divergences both by the price-based MACD and momentum-based ROC.
Oil opened higher and advanced toward $42, after Aramco’s fundamental call on improved demand.
It is hard to formulate a clear technical opinion on WTI though, as the price develops a rising wedge following an advance, rather than a decline, which would then have been bearish. The technicals remain depressed.
Companies releasing earnings this week include Barrick Gold (NYSE:GOLD), SoftBank (OTC:SFTBY), LYFT (NASDAQ:LYFT) and Cisco Systems (NASDAQ:CSCO).
New Zealand’s policy decision is due Wednesday.
On Friday, China releases a slew of data including industrial production and retail sales.
US retail sales are also reported on Friday, with a smaller increase forecast for July than in the prior two months.
Futures on the S&P 500 Index were little changed.
The Stoxx Europe 600 Index rose 0.3%.
The MSCI Asia Pacific Index increased 0.1%.
The MSCI Emerging Markets Index declined 0.1%.
The Dollar Index rose 0.15%.
The euro sank 0.1% to $1.1773.
The British pound gained 0.1% to $1.3063.
The Japanese yen weakened 0.1% to 105.98 per dollar.
The offshore yuan was little changed at 6.9686 per dollar.
The yield on 10-year Treasuries gained one basis point to 0.57%.
The yield on two-year Treasuries declined less than one basis point to 0.13%.
Germany’s 10-year yield rose one basis point to -0.50%.
Britain’s 10-year yield jumped two basis points to 0.16%.
Japan’s 10-year yield dipped one basis point to 0.012%.
West Texas Intermediate crude gained 0.3% to $41.71 a barrel.
Brent crude climbed 0.1% to $44.74 a barrel.
Gold weakened 0.2% to $2,031.97 an ounce.