U.S. Opening Bell: Oil, Futures Slip: USD Climbs; Iran Announcement Eyed

Key Events

US futures on the S&P 500, NASDAQ 100 and Dow seem to be mirroring the downward move seen in Europe this morning, where shares listed on the STOXX 600 slipped lower after opening broadly flat after a two-day rally. European investors appear to lack the conviction of Asian traders, where earlier today, shares across regional indices extended a cautious rebound from a two-week decline that had been spurred by concern over emerging markets weakness when US yields, the dollar, and energy prices were on the rise.

At about 92.88 at the time of writing, the dollar is testing yesterday's session high, after up-and-down movements resulted in a high-wave candle, highlighting a lack of leadership. On the heels of a 4 percent advance since mid-April, the Dollar Index is now pressured by the resistance of the October-December H&S top neckline.

However, since crossing above the downtrend line of late December 2016, traders who follow trend lines may increase bets that the resistance under 93.00 will be broken, paving the way for the 94.00 shoulders levels, before the 95.00 head levels.

The pound dropped to its lowest level in almost four months following worse than expected house price data ahead of the Bank of England rate meeting on Thursday. UK house prices cooled unexpectedly in April according to mortgage lender Halifax. House prices increased by 2.2% in April from the same period one year ago, down from 2.7% in March, and lower than an expected increase of 3.3%. Rate hike expectations are now below 10%, compared with over 90% one month ago.

Global Financial Affairs

The US 10-year Treasury yield—the cause of much consternation and heartburn for traders after its first double-digit correction in two years this past in January—is flat for the fourth day on a closing basis. It has been fluctuating intraday, both last Thursday and yesterday, and now hovers around 2.95 percent, still comfortably below the 3 percent psychological level.

Technically, the yield is congesting within a bullish falling flag. An upside breakout would suggest an increase of 20 basis points, with a minimum target of 3.14 percent.

Although so far yields remain below the key 3 percent mark, the 7 percent flag pole (the sharp, 7-day straight advance before the flag's profit-taking congestion) seems to have already wrought havoc on some developing markets. The Indonesian rupiah dropped to 14,274 against the dollar yesterday, hitting its weakest level since October 2015, in the wake of a disastrous air crash at that time.

Today, however, the IDR is paring a decline that retracted most of yesterday's gains. As well, the country's sovereign bonds were sold off and the Jakarta Composite Index suffered the worst drop among regional peers; it closed 1.88 percent lower. The Indonesian benchmark is sliding for a third straight week, after crossing below the uptrend line since 2015 and completing a descending peak-trough series, which officially placed it in a downtrend.

In additional emerging markets news, Turkey's lira and equities retreated yesterday, while the Argentina's peso seemed to stabilize following a tumultuous week of unscheduled interest rate increases by the Central Bank of Argentina.

This morning though, stocks on Japan's Nikkei and TOPIX indices advanced alongside shareso n Australia's S&P/ASX 200 and Hong Kong's Hang Seng.

US stocks advanced at a measured pace during yesterday's session, albeit steadily enough for the S&P 500 to cross above its congestion highs since mid-April. The test for the US benchmark index would be the 2,700 trend line connecting the highs of a much larger and much more meaningful consolidation since the January record.

Gains were fueled by Technology firms which outperformed (+0.7 percent), followed closely by Financials (+0.66 percent) and Real Estate (+0.66 percent). Despite the heightened focus on oil, energy shares climbed only 0.14 percent, after oil gave back most of its gains.

Defensive sectors underperformed, with Consumer Staples (-0.62) and Utilities (-0.52) leading the pack.

A weaker pound and merger talks lifted the UK's FTSE on Tuesday. Shares in UK-based rare disease specialist Shire (LON:SHP) rose 3.7% after it accepted a takeover offer of £45.3bn from Japanese pharmaceutical firm Takeda (T:4502).

Virgin Money (LON:VM) shares jumped more than 10% on Tuesday following news of a takeover bid by Clydesdale owner CYBG (LON:CYBGC) to the tune of £1.6bn.

U.S. Apollo Global Management (NYSE:APO) withdrew its interest in a deal to buy UK transport firm FirstGroup (LON:FGP). Shares in the transport firm were down 6.90% following the private equity firm’s withdrawal.

SKY (LON:SKYB) shares were down 1.3% on Tuesday after the European Commission reported that antitrust regulators will rule on U.S. cable company Comcast’s £22bn bid for Sky by 15 June. Comcast’s (NASDAQ:CMCSA) offer for the UK TV company is greater than Twenty First Century Fox’s bid, made back in 2016 yet beset by UK government hurdles wary of giving Rupert Murdoch too great a share in the UK press.

Crude is holding steady at yesterday's closing price, after it retreated from above $70 a barrel—its highest level since 2014—whose fluctuation and a candlestick formation similar to the one seen for the dollar suggests oil prices tracked the greenback rather than noise around the oil market itself.

Still, crude is likely to experience ongoing fluctuations as we approach US President Donald Trump's deadline for deciding whether to continue or halt the current Iran nuclear deal. The president is expected to announce his decision later today. Key deal allies, including Germany, France and the the UK, are opposing a withdrawal.

Geopolitical activity notwithstanding, the oil market's new dynamic will likely be a key reason for the commodity's price movements going forward. Sector beneficiaries are also in flux.

Up Ahead

• Trump is expected to announce his decision on sanctions against Iran at 2 pm eastern today.

• Australia's annual federal budget is released on Tuesday.

• Japanese Prime Minister Shinzo Abe meets South Korean President Moon Jae-in and Chinese Premier Li Keqiang on Wednesday.

• The Bank of England's policy decision is due on Thursday.

• US inflation data for April comes out on Thursday.

Earnings Reports This Week

• Disney (NYSE:DIS) is scheduled to release corporate results today after market close, for the fiscal quarter ending March, with a forecast of $0.64 EPS, versus $0.51 for the same quarter in the previous year. While the media and entertainment giant's results are unlikely to be much of a market mover, management's longer term efforts may be significant for the stock.

• Marriott (NASDAQ:MAR) is expected to report earnings today after market close, for the fiscal quarter ending March; it's expected to post a $1.25 EPS, after last year posting $1.01 for the corresponding quarter.

• Twenty-First Century Fox (NASDAQ:FOX) is due to publish its results tomorrow after the market close, for the fiscal quarter ending March, with a $0.52 EPS prediction, two cents shy of the same quarter last year.

• NVIDIA (NASDAQ:NVDA) will be releasing its earnings on Thursday after market close, for the fiscal quarter ending April. Its EPS is seen to be $1.47; last year it was $0.82 for the same quarter.

• Thomson Reuters (NYSE:TRI) is set to report corporate results before market open on Friday, for the fiscal quarter ending March, with a $0.05 EPS forecast, VS the $0.63 posting of last year's corresponding quarter.

• The UK's BT Group (LON:BT) announces full year results on Thursday. Over the past month BT's share price has lifted off 5 year lows as a result of a shared content agreement with rival SKY.

Market Moves

Stocks

• The UK’s FTSE 100 climbed 0.3 percent to 7,567.14, the highest in 14 weeks.

• The Stoxx Europe 600 Index advanced less than 0.05 percent, the highest in almost 14 weeks.

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

• The MSCI Emerging Market Index increased 0.5 percent, the biggest climb in more than a week.

• The Jakarta Composite Index sank 1.8 percent to the lowest in nine months.

Currencies

• The pound slipped to its lowest level against the dollar in almost fourth months.

• The Dollar Index climbed 0.15 percent, toward the top of a four-day range.

• The Japanese yen climbed in its fifth straight advance.

• The euro declined less than 0.05 percent to $1.1918, the weakest level in almost 19 weeks.

• The Turkish lira dipped 0.1 percent, hitting the weakest level on record with its seventh consecutive decline.

Bonds

• The yield on 10-year Treasurys climbed less than one basis point to 2.95 percent.

• The yield on 30-year Treasurys declined less than one basis point to 3.12 percent.

• Germany’s 10-year yield advanced less than one basis point to 0.53 percent.

Commodities

• WTI crude decreased 0.9 percent to $70.06 a barrel, the first retreat in a week.

• LME copper advanced 0.4 percent to $6,850.50 per metric ton, the highest in more than a week.