U.S. Opening Bell: Oil Rout Wreaks Havoc Across Markets; Pound Drops

Key Events

Equities in Europe and US futures on the S&P 500, Dow and NASDAQ 100 took their cues from Asian selling amid oil's record 13-day loosing streak and mixed economic data from China.

The STOXX Europe 600 slid lower at the open, as jitters in the energy sector and WTI's ongoing slide continued to wreak havoc across markets. The price of the pan-European benchmark has been trading at the very bottom of the session, demonstrating no takers for the dip.

During the Asian session, energy producers weighed on Australian shares, with the S&P/ASX 200 (-1.74) underperforming its regional peers. Japan’s Nikkei 225 (+0.16) outperformed but slipped off its highs of the day, while shares edged lower in Hong Kong’s Hang Seng (-0.54%) , China’s Shanghai Composite (-0.85%) and South Korea’s KOSPI (-0.15%).

Global Financial Affairs

Yesterday, price glitches in energy stocks overshadowed Tuesday's newfound optimism over a trade deal—which remained mostly a matter of headlines rather than translating into any meaningful price action.

The morning session saw shares on an upswing after White House economic adviser Larry Kudlow told CNBC that he US and China are talking on “all levels” of government. That followed an overnight report that China’s Vice Premier Liu He will pave the way for a meeting between the leaders of the world's two biggest economies later this month.

However, oil’s stunning 7.07 percent plunge, or $4.24, which brought aggregate 12-day losses to 17.61 percent, or $11.90, sparked a selloff in the Energy sector (-2.30 percent), which in turn dragged the major indices lower.

Materials (-0.30 percent) and Industrials (+0.45 percent), which should have benefited from more upbeat trade headlines, failed to stand out, with sector heavyweights such as Caterpillar (NYSE:CAT) (+0.77 percent) and 3M (NYSE:MMM) (+0.68 percent) falling short of achieving larger gains.

The S&P 500 fell 0.15 percent for a total four-day setback of 3.3 percent. Financials (+0.56 percent) outperformed and Utilities (+0.42 percent) managed to post a relatively upbeat performance.

The Dow Jones Industrial Average dropped 0.4 percent for a combined three-day loss of 3.45 percent. Technically, the price yesterday fell below the 100 DMA, rebounded intraday to the underside of the moving average and fell back down. However, after reaching 0.35 percent above the 200 DMA, it closed off the low of the day, about 0.7 percent above the most observed moving average.

The NASDAQ Composite remained flat yesterday. However, with a four-day loss of 4.89 percent, it still was the worst performing index during this rout. However, it is noteworthy that the tech-heavy benchmark manage to limit losses to 0.03 percent amid an ongoing tech drubbing, even after Apple (NASDAQ:AAPL) admitted to a serious problem with its iPhone. Might this be signaling the end of the tech-led selloff?

Apple fell 1 percent during yesterday's session, bringing its four-day dip to a whopping 7.75 percent. Technically, the price slid below the 200 DMA for the first time since April, which is bearish, but it formed an inverted hammer, a bullish candlestick, which may suggest an upward correction within a short-term and mid-term downtrend, within a long-term uptrend.

The uptrend line since May 2016, is currently below $180, about 8 percent below the current price, and rising. Traders could wait with a long position for a further fall to the full correction of the long-term uptrend or for an upward correction within the short and mid-term downtrends for a short.

The Russell 2000 gave up 0.16 percent, its fourth day of losses for a combined drop of 4.35 percent. Technically, the 50 DMA is on top of the 200 DMA and about to execute a Death Cross.

The yield on 10-year Treasurys ticked lower for a fourth day, about halfway down to the neckline of a double-top. For now, it found support of the 50 DMA.

In FX markets, the dollar recouped some of yesterday’s losses, tracking higher Treasury demand.

The pound dropped as traders waited to see whether Theresa May can persuade her cabinet to back her Brexit deal at a key meeting today. Technically, cable is forming a symmetrical triangle, presumed to be a continuation pattern, as both supply and demand increase positions, till they meet in the middle. The trend is decided with a decisive breakout, up or down.

India's rupee rallied to an almost two-month high and the country's sovereign bonds gained ground as the slump in oil prices deepened, easing investor concerns over the oil-importing nation’s current account deficit.

Focus will now turn to Federal Reserve Chair Jerome Powell's speech later today, with some observers expecting Powell will calm worries that the central bank is pushing its interest rate hike cycle too far. That comes after the latest read on China’s economy, where retail sales missed estimates, though industrial production held up. Any signal from the Fed may thereby help shed more light on the overall 'end of global growth' narrative.

Up Ahead

• Fed Chairman Jerome Powell discusses national and global economic issues with Dallas Fed President Robert Kaplan at an event hosted by the Dallas Fed.
• US consumer inflation probably rebounded in October after easing in September. CPI data is projected to show a 0.3 percent increase on Wednesday.
• Also today, UK Prime Minister Theresa May will ask her divided Cabinet ministers to back her Brexit deal or quit at a meeting scheduled for 14:00 GMT.
• Policy decisions are coming from central banks in Mexico, Philippines, and Thailand.

Market Moves

Stocks

• The UK’s FTSE 100 Index was up 0.1 percent having rebounded mid-session after dropping to its lowest level in almost three weeks shortly after the open.

• Futures on the S&P 500 fell 0.3 percent as of 8:09 a.m. London time, hitting the lowest level in two weeks with their fifth consecutive decline.
• The Stoxx Europe 600 slid 0.8 percent to the lowest level in more than two weeks.
• Germany’s DAX Index lost 0.8 percent.
• The MSCI Asia Pacific Index fell 0.2 percent to the lowest level in two weeks.
• The MSCI Emerging Market Index dropped 0.3 percent, reaching the lowest level in two weeks on its fifth straight decline.

Currencies

• The British pound fell less than 0.05 percent to $1.2972.
• The Bloomberg Dollar Spot Index climbed 0.1 percent.
• The euro slipped 0.1 percent to $1.128.
• The Japanese yen dipped 0.1 percent to 113.87 per dollar.

Bonds

• The yield on 10-year Treasuries gained less than one basis point to 3.14 percent.
• Germany’s 10-Year yield dropped two basis points to 0.39 percent, the lowest level in two weeks.
• Britain’s 10-Year yield lost four basis points to 1.484 percent.
• The spread of Italy’s 10-year bonds over Germany’s rose 13 basis points to 3.1698 percentage points to the biggest premium in three weeks.

Commodities

• West Texas Intermediate crude fell 0.4 percent to $55.47 a barrel, hitting the lowest level in 11 months with its 13th straight decline.
• Gold fell 0.1 percent to $1,200.90 an ounce.