- European retailers outperform
- Treasury investors signal potential reversal
- Bitcoin breaches $50,000
US futures on the Dow, S&P, NASDAQ 100 and Russell 2000 advanced on Monday, along with European shares, ahead of the start of the US session as investors continued buying last week’s dip. However, market sentiment remains cautious due to the ongoing spread of the Delta variant, China’s ongoing regulatory clampdown and the upcoming, potentially market moving Federal Reserve Jackson Hole Symposium starting on Thursday.
The dollar retreated, boosting oil and gold.
Global Financial Affairs
Although Friday’s rally was supported by investors buying into defensive stocks along with the tech industry, today’s rally in US futures shows that the reflation trade is leading the move up.
In Europe, retailers led the STOXX 600‘s rally, which is set to be the sharpest advance in a month. A takeover bid for supermarket chain J Sainsbury (LON:SBRY) catapulted its shares almost 13%, to their highest level since mid-2014. Contracts on the Russell 2000—whose members tend to be small, US domestic businesses that have the most to gain from a reopening economy— outperformed, up 0.8%, at the time of writing, nearly three times that of the 0.3% rise at present for NASDAQ 100 futures, which represents growth stocks that tend to benefit from economic contraction, making them especially in demand in a stay-at-home environment.
MSCI’s Asia Pacific benchmark also jumped by the most in a month due to a dip-buying bounce in Chinese technology stocks, after a protracted selloff.
Investors loosened their grip on safe haven Treasuries, including the 10-year note, allowing yields to rise for the second day, for the first time in two weeks.
10-year Treasuries Daily
Rates are heading higher along a fledgling rising channel (green), which will have to overcome the more mature falling channel (red). Notice, that if the green channel overtakes the bottom of the red channel, yields will have completed a bottom.
The decreased demand for Treasuries allowed the dollar to slip for the second day.
Dollar Index Daily
The greenback’s decline comes at a confluence of resistance points: The Mar. 31 high. If it’s surpassed, the USD will complete a double-bottom at the top of the rising channel since July and the shorter one since the August bottom. Therefore, the two rising channels will likely support the price, giving it another opportunity to take on the Mar. 31 peak in a more decisive manner.
Gold rose for the second day, in mirror image of the dollar.
The yellow metal is possibly forming a falling flag, whose upside breakout will take on the falling channel’s bearish bias.
Bitcoin surpassed the key $50,000 level, reaching its highest point since early May.
The digital token has the momentum to keep going higher, after completing a bullish pennant within a rising channel.
The weakening dollar reduced some of the pressure on commodities, including oil prices, allowing dip buyers to take advantage. However, we expect the rally to be short lived.
The current rise for WTI is a return-move to retest a top in the shape of a descending triangle.
- The ECB publishes the account of its monetary policy meeting on Thursday.
- Also on Thursday, US GDP and initial jobless claims are released.
- July US personal income and spending data is published on Friday.
- The STOXX 600 rose 0.6%
- Futures on the S&P 500 climbed 0.3%
- Futures on the NASDAQ 100 gained 0.3%
- Futures on the Dow Jones Industrial Average added 0.4%
- The MSCI Asia Pacific advanced 1.2%
- The MSCI Emerging Markets Index rose 1%
- The Dollar Index was little changed
- The euro was little changed at $1.1709
- The Japanese yen fell 0.2% to 109.98 per dollar
- The offshore yuan was little changed at 6.4968 per dollar
- The British pound rose 0.1% to $1.3639
- The yield on 10-year Treasuries advanced one basis point to 1.27%
- Germany’s 10-year yield advanced one basis point to -0.48%
- Britain’s 10-year yield advanced two basis points to 0.54%
- Brent crude rose 2% to $66.50 a barrel
- Spot gold rose 0.2% to $1,785.13 an ounce