U.S. Opening Bell: Investors Cash Out On Trade, Political Fears; WTI Pops

Key Events

Global stocks and futures for the S&P 500, Dow and NASDAQ 100 were mixed this morning as investors struggled to find stable footing amid multiple headwinds: globally, the perceived threat to the worldwide growth trajectory caused by an unrelenting US-China trade war; in the US, rising interest rates and heightened uncertainty stemming from ongoing political developments.

However, both European shares and US futures contracts were seen edging higher later in the session, pointing to a rebound from extended Asian weakness.

Banks and healthcare shares helped the pan-European STOXX 600 trim yesterday's losses and halt a six-day losing streak. Technically, supply overcame demand upon reaching the downtrend line since July 31.

Earlier, during Asian trade, most regional benchmarks slipped lower. Japan’s Nikkei 225 bucked the trend, climbing 0.15 percent to the highest level since late-January, just 0.8 percent away from levels last seen in December 1991.

China's Shanghai Composite shed 0.58 percent on the new batch of US tariffs. Property shares tumbled, mirroring the declines seen yesterday among their US counterparts, as local provinces are considering whether to scrap the property pre-sale system that allowed developers to secure funds even while projects are still under construction.

Global Financial Affairs

Yesterday, worries that the US-Sino trade dispute would end the first synchronized global growth in a decade were reignited after China refused to meet with US representatives unless the Trump administration stopped threatening to impose further tariffs. Further weighing on stock performance were reports that US Deputy Attorney General Rod Rosenstein, who oversees a probe into Russia's interference with the 2016 US presidential election, could soon leave his post.

The S&P 500 dropped 0.35 percent, extending the over 0.7 percent take-profit correction that followed the index's new all-time-highs. Industrials (-1.71 percent) and Materials (-1.4 percent) both slid on the trade war escalation. Real Estate stocks (-1.96 percent) underperformed, while Energy shares (+1.46 percent) outperformed on the back of oil's price surge following the decision, by OPEC and NOPEC oil producers, to refrain from stepping up production to offset potential Iran supply glitches. Consumer Staples (-1.53 percent) also fell, underscoring investor eagerness to cash out.

The Dow Jones Industrial Average, whose listed mega-cap firms depend heavily on foreign markets, was Monday's worst performer, giving up 0.68 percent. The Russell 2000 slipped 0.41 percent. The NASDAQ Composite was the only US major closing in positive territory, edging 0.08 percent higher.

Despite the prospect of higher interest rates looming and the increased trade risk, the dollar seems unable to climb back up above 95.00, where it found support for over two months. Perhaps the Fed's expected hike on Wednesday is already fully priced in, or the greenback is loosing its shine as the go-to safe haven in times of trade uncertainty.

Interestingly, traders are also not seeking refuge in the yen, which fell for the fourth straight day against the USD. A close at this level would mark the lowest level for the Japanese currency since January.

Gold is flat, which suggests that investors are also shunning the yellow metal's trademark safety.

Meanwhile, yields on 10-year Treasurys reached 3.104, just under 0.8 percent away from their highest level since July, as investors sold off their bond holdings. If we also consider yesterday's equity losses, it appears that traders have held onto cash.

Crude oil reached the halfway point to $73 after OPEC and Russia were seen unwilling to step up their production to offset a potential shortage stemming from Iran's sanctions. Brent oil futures crossed over the $80 level, a resistance level since mid-May, hitting a four-year high. Technically, WTI extended a penetration to an H&S bottom neckline. This upward trajectory could signal a new era for energy prices.

Up Ahead

• Japanese Prime Minister Shinzo Abe meets with President Donald Trump in New York to discuss trade on Wednesday

• Also, on Wednesday, the FOMC's monetary policy decision will be followed by a press conference with Chairman Jerome Powell

• Thursday sees US durable goods orders, GDP data and jobless claims coming out.

• Revised UK GDP for the second quarter is released on Friday.

Market Moves

All prices correct at time of writing

Stocks

• The UK’s FTSE 100 ticked 0.3 percent higher.

• The STOXX Europe 600 gained 0.2 percent.

• Futures on the S&P 500 gained less than 0.05 percent.

• Germany’s DAX climbed 0.2 percent.

• The MSCI Emerging Market Index slipped 0.2 percent.

• The MSCI Asia Pacific Index gained 0.2 percent.

Currencies

• The British pound dropped 0.1 percent to $1.3104.

• The Dollar Index inched less than 0.05 percent higher to the highest level in a week.

• The euro climbed 0.1 percent to $1.1756.

• The Japanese yen lost 0.1 percent to 112.91 per dollar, the weakest level in more than eight months.

Bonds

• Britain’s 10-year yield climbed one basis point to 1.624 percent, the highest level in more than seven months.

• The yield on 10-year Treasuries gained one basis point to 3.09 percent, hitting the highest level in almost 19 weeks with its sixth straight advance.
• Germany’s 10-year yield edged two basis points higher to 0.53 percent, the highest level in more than four months.
• Italy’s 10-year yield dropped six basis points to 2.889 percent, the biggest fall in more than a week.

Commodities

• West Texas Intermediate crude gained 0.2 percent to $72.26 a barrel, the highest level in almost four years.

• Gold ticked 0.1 percent higher to $1,199.94 an ounce.