U.S. Opening Bell: After New U.S. Highs, Futures Hit By Trump Scandals; Oil Gains

Key Events

US futures on the Dow, S&P 500 and NASDAQ 100 turned lower this morning, though global equities were mixed, as investors attempt to second-guess market reaction to the latest scandals out of the US, generated by close associates of President Donald Trump. The dollar and yields trimmed losses.

Headlines yesterday afternoon, including the eight-count conviction of Trump's former campaign manager Paul Manafort for financial crimes, as well as the guilty plea of Trump's personal lawyer and 'fixer' Michael Cohen to eight criminal charges including illegal campaign contributions—which implicates the US president in campaign finance violations, a criminal offense—could be pressuring markets.This would offset the US rally that scored fresh records last night.

The pan-European STOXX 600 Index opened lower, shaving more than half of yesterday's gains. However, dip buyers immediately bid up prices to a point near yesterday's close.

The FTSE started the session in the red dipping to its lowest level for the week, however the UK index moved back into the green mid-session thanks to a hesitant pound and an uptick in commodity prices, helping mining stocks recover some losses from earlier in the morning. BHP Billiton (LON:BLT) edged up over 1.5 percent, after opening lower and spending Tuesday in the red, while mining stocks Rio Tinto (LON:RIO) and Glencore (LON:GLEN) were up 0.8 and 0.9 percent respectively.

Global Financial Affairs

Notwithstanding, the latest duo of political disasters for Trump has pushed US equity futures lower and temporarily spurred demand for safe haven assets. Still, there appeared to be no meaningful impact on global markets.

Trade during the Asian session was mixed. Japan’s Nikkei 225 rose 0.58 percent and Hong Kong’s Hang Seng climbed 0.63 percent. On the other hand, China’s Shanghai Composite dropped 0.7 percent. South Korea’s KOSPI edged up 0.14 percent, but Australia’s S&P/ASX 200 retreated 0.29 percent.

Last night's US session saw stocks advance, highlighted by the small cap Russell 2000 Index hitting a fresh record at the close. But other major indices, particularly the S&P 500 and Dow, experienced weakness at the close, demonstrating that bears have not yet capitulated.

The S&P 500 gained 0.21 percent, propelled by growth stocks led by Consumer Discretionary (+0.79 percent) and Industrials (+0.74 percent) shares. The benchmark index finally posted a new high, an intraday record. However, selling pressure increased at the close, pushing the index back to its opening price. The pattern formed a shooting star, indicating that bears had the last word.

The negative sentiment is magnified by the high of the session finding resistance at the late January record. As well, the closing price demonstrated that supply outstripped demand at the price level of the early August peak.

The Dow Jones Industrial Average performed even better for the day, climbing 0.25 percent. While it remains 3 percent below its record, it managed to scale above the late February peak, making yesterday’s close the highest since the late-January correction. However, like the S&P 500, it also formed a shooting star, projecting weakness.

Since the latest Trump-related scandals broke after markets closed, it’s unclear whether the sharp selling off the daily highs was led by informed money, or was merely a 'happy' coincidence. Whatever the immediate reason, the addition of yet more geopolitical risk versus an expanding economy colliding with expectations of rising interest rates, makes it even more challenging to wade through the labyrinth of this increasingly complex market.

Technically, while the S&P 500, the most important major US equity benchmark, achieved a record high, it failed to hold on at this critical level, which increases the probability of a correction. Add the US tax overhaul and emerging markets turmoil to the mix and analysts may find themselves completely lost.

Not surprising then that the flattening yield curve, where the differential between the 10-year and 2-year Treasury yield narrows, projects trader indecision, even as the 10-year yield hovers just below the 3 percent psychological level.

Meanwhile, the most recent Fed minutes, scheduled for release later today, may provide more insight into monetary policy, ahead of a gathering of central bankers at the Jackson Hole, Wyoming symposium that begins tomorrow. That event may offer additional clues as to what global central bankers are thinking.

The US dollar is recovering somewhat from yesterday’s selloff, after falling back below the top of an ascending triangle. Still, it remains well within a rising channel.

The Mexican peso jumped before slipping marginally, on hopes of NAFTA negotiations finalizing.

In commodity markets, crude oil built on yesterday's gains, triggered by a US plan to sell strategic oil reserves, highlighting concerns about tightening global supplies. Technically, the rise since the August 15 plunge may be viewed as a return move to retest the bearishness of the descending channel.

On the other hand, it may also be a bounce off the uptrend line since mid-November. Keep an eye on these two technical milestones in order to assess the supply-demand balance.

Lumber prices hit the roof in May. They've since fallen, but the US housing market continues to fuel futures contracts for the agricultural commodity.

Up Ahead

• The Fed releases its latest FOMC meeting minutes on Wednesday.
• US Existing Home Sales for July are also due out today; the release is forecast to come in at 5.44M, up from 5.38M in June.
• Euro area preliminary PMI data for August is due on Thursday.

Market Moves

All information provided is accurate as of time of writing

Stocks

• The U.K.’s FTSE 100 increased 0.3 percent, recovering from its lowest level in a week shortly after market open.
• The Stoxx Europe 600 Index decreased 0.1 percent.
• Futures on the S&P 500 Index declined 0.2 percent, the first retreat in a week.
• The MSCI Emerging Markets Index advanced 0.3 percent to the highest in more than a week.
• Germany’s DAX increased 0.1 percent its highest in more than a week.

Currencies

• The British pound was up 0.05 percent to 1.2902, after climbing 0.8 percent in Tuesday's session.
• The Dollar Index gained 0.14 percent, the first advance in a week.
• The euro decreased 0.1 percent to $1.1563, the single currency's first retreat in more than a week.
• The Swiss franc increased 0.1 percent to $0.9848, the strongest in almost 11 weeks.

Bonds

• The yield on 10-year Treasuries decreased less than one basis point to 2.83 percent.
• Germany’s 10-year yield dipped one basis point.

Commodities

• Gold fell 0.2 percent to $1,193.23 an ounce, the most significant decline in a week.
• Brent crude increased 0.6 percent, hitting the highest point in more than two weeks with its fifth consecutive advance.