- US equities traditionally rally during this shortened holiday week
- PBOC signals stimulus
- Europe coronavirus restrictions dent risk appetite
Key Events
All four major US contracts—on the Dow, S&P, NASDAQ and Russell 2000—were well in the green during early Monday trade, suggesting the underlying benchmarks are set for gains, with Russell 2000 futures outperforming.
Gold has been sliding while the dollar rallied.
Global Financial Affairs
As we noted yesterday small caps have led the rally into Thanksgiving week and if historical seasonality is a guide, the broader stock market will post a positive performance this week. Small caps are likely to benefit most from a US market rally, as the sector has been lagging, particularly when compared to large tech shares.
Last week's retail sales figures were strong, despite the fact that the prices of goods have jumped by the fastest pace since the 1990s. The data put small caps under the spotlight as strong spending is a vote of confidence in the economy, which should benefit domestic firms the most, as they were the sector that suffered disproportionately during coronavirus lockdowns. Wednesday's personal consumption expenditure data is expected to confirm this view.
Another market focus this week is President Joseph Biden's nomination for the next Federal Reserve Chair. Traders will be closely watching to see if he chooses incumbent Jerome Powell or Fed Governor Lael Brainard for the term which begins in February 2022. Expectations are that Biden will stick with the status-quo.
US indices continue to outperform globally, nearing records, as investors see few regional alternatives amid spiking inflation. In addition, Asia and Europe continue to be plagued by persistent contagion of coronavirus.
On Monday in Europe, the STOXX 600 Index ended a two-day selloff but new social restrictions across the continent tempered gains. In Italy, Telecom Italia (MI:TLIT) surged almost 30% after KKR bid for the telecom giant.
Earlier, stocks in Asia painted a mixed picture. China's Shanghai Composite rose 0.6% after the People's Bank of China (PBOC) signalled it might ease restrictions to support the world's second-largest economy's recovery.
However, South Korea's KOSPI jumped 1.4%, outperforming regional peers, after data revealed that the country's exports are set to extend double-digit gains in November on strong chip sales.
Two- and five-year US government bond yields gained at least two basis points each.
The dollar rose to its highest level since July 16.
The greenback produced a small candle, perhaps finding resistance by Wednesday's cross between a High Wave candle and Shooting Star, both of which hint at a potential retreat to the mean of the rising uptrend line, currently at 95.00.
Gold, in a mirror image to the dollar, opened lower, producing the same Doji.
However, unlike the US currency, the yellow metal may have topped out.
Bitcoin extended a selloff to its second day, though the digital token found support by its Oct. 28 low.
The cryptocurrency is on the cusp of topping out.
Concerns of further coronavirus outbreaks weighed on oil prices, pushing them back towards eight-week lows on worries of decreased demand. However, markets are expecting either Saudi Energy Minister Abdulaziz bin Salman, who leads the 13-member OPEC bloc, or his Russian counterpart Alexander Novak, who guides nine other non-OPEC oil producers, to issue some market-boosting remarks in this so-called 'Holiday Week.'
WTI established a short-term downtrend after posting a trough lower than the $78.24 low posted on Nov 4.
Up Ahead
- On Tuesday Eurozone PMI data is published.
- The US FOMC publishes the minutes of the last meeting on Wednesday.
- On Wednesday US GDP figures are printed
Market Moves
Stocks
- The STOXX 600 rose 0.4% as of 8:38 a.m. London time
- Futures on the S&P 500 rose 0.3%
- Futures on the NASDAQ 100 rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.4%
- The MSCI Asia Pacific Index fell 0.3%
- The MSCI Emerging Markets Index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.02% to $1.1286
- The Japanese yen rose 0.1% to 114.18 per dollar
- The offshore yuan fell 0.08% to 6.3827 per dollar
- The British pound fell 0.1% to $1.3439
Bonds
- The yield on 10-year Treasuries was little changed at 1.55%
- Germany's 10-year yield was little changed at -0.35%
- Britain's 10-year yield was little changed at 0.88%
Commodities
- Brent crude rose 0.5% to $79.26 a barrel
- Spot gold was little changed