U.S. Opening Bell: Europe Shares Follow U.S. Futures Up, Yields Gain; Oil Slides

Key Events

On Monday, US futures on the Dow Jones, S&P 500, NASDAQ, and Russell 2000 advanced with European shares ahead of peace talks between Russia and Ukraine later today. Still, markets are expected to remain subdued ahead of Wednesday's, closely watched Federal Reserve Policy Meeting, even though Fed Chair Jerome Powell has already signaled that he plans to hike rates by 0.25%.

The global bond selloff persisted, with US 5-year Treasury yields surpassing 2% for the first time since mid-2019.

Global Financial Affairs

All four US futures were trading in positive territory which some market watchers are characterizing as a sign of a rally, following last week's steep selloff. However, we think investors are still worried, despite today's uptick.

Insurers and banks were the drivers of the STOXX 600's advance on Monday.

Earlier, in Asia, stocks were mixed. Hong Kong's Hang Seng plunged about 5% after neighboring China's 'Silicon Valley' began a lockdown amid the worst spike in COVID-19 cases there in two years.

With a 2.6% drop, China's Shanghai Composite was the second-worst performer in the region, as five US-listed Chinese companies, worth $1.1 trillion, face the threat of delisting. The US Securities and Exchange Commission has shortlisted BeiGene (NASDAQ:BGNE), Yum China (NYSE:YUMC), Zai Lab (NASDAQ:ZLAB), ACM Research (NASDAQ:ACMR), and HUTCHMED (NASDAQ:HCM), saying they must meet US accounting standards.

This news has also dented marquee Sino stocks like Alibaba (NYSE:BABA), JD.com (NASDAQ:JD), and Tencent (OTC:TCEHY).

Additionally, China continued its tech crackdown, as the country's top internet official signaled more stringent regulations for streaming entertainment services aimed at children, social networks, and online messaging services.

Australia's ASX 200 rose 1.21%. Among the equity winners, there were financials and healthcare stocks, as investors seemed willing to increase risk on hopes of a peace deal in the Russia-Ukraine conflict.

Japan's Nikkei 225 gained 0.58% after falling oil prices eased the pressure on the economy which is heavily reliant on oil imports. Travel shares also advanced due to a drop in the number of COVID-19 cases as well as increased optimism that the government would support the sector.

Financial stocks also climbed during Japanese trade amid rising yields for long-dated bonds, boosting the profit outlook. Finally, carmakers benefited from a weaker yen—which fell to its lowest since Dec. 20, 2016—as it will make Japanese cars more competitively priced internationally.

Technically, we could be looking at a significant move for the currency.

After the USD/JPY completed a monthly triangle between June 2015 and March 2021, the pair has peaked above the trendline since April 1990, potentially ending a massive bottom.

The 10-year Treasury yield continued its advance to the highest level since July 2019. European yields also moved higher.

The H&S officially failed against the might of the massive symmetrical triangle. That doesn't mean, however, that it will not turn into a double-headed H&S top or double top. Still, we maintain our faith in the much more robust bullish (for yields) triangle, which is bearish for bonds.

The dollar gave up earlier gains and pared some of its rallies from Thursday and Friday.

Technically, the greenback could be developing a falling channel, bullish after the sharp rise amid the breakout to an H&S bottom.

Gold may decline amid profit-taking and dollar strength after fulfilling the huge triangle's implied target. Any progress in negotiations between Ukraine and Russia will also likely weigh on the haven asset.

Bitcoin recovered erasing yesterday's losses.

From a technical perspective, the cryptocurrency may be forming a symmetrical triangle, bearish after the preceding H&S top.

Oil resumed falling for the third out of four days, as investors remain on tenterhooks in the hope that the Russia-Ukraine talks will head in the right direction.

The price may be on the verge of completing an H&S top after back-to-back raising flags, aiming at the $80 levels.

Up Ahead

• German ZEW Economic Sentiment data is published on Tuesday.
• US PPI figures are reported on Tuesday.
• On Wednesday, the EIA reports crude oil inventories.

Market Moves

Stocks

• The STOXX 600 rose 0.8%
• Futures on the S&P 500 rose 0.8%
• Futures on the NASDAQ 100 rose 0.5%
• Futures on the Dow Jones Industrial Average rose 0.9%
• The MSCI Asia Pacific Index fell 1.4%
• The MSCI Emerging Markets Index fell 2.3%

Currencies

• The Dollar Index retreated 0.27% to 98.87
• The euro rose 0.3% to $1.0942
• The Japanese yen rose 0.6% to 118.01 per dollar
• The offshore yuan up 0.4% to 6.3808 per dollar
• The British pound was little changed at $1.3047

Bonds

• The yield on 10-year Treasuries advanced six basis points to 2.05%
• Germany's 10-year yield rose to 0.334%
• Britain's 10-year yield increased to 1.589%

Commodities

• WTI crude decline 3.96% to $104.92
• Brent crude fell 4% to $108.03 a barrel
• Spot gold fell 1.3% to $1,962.58 an ounce