Opening Bell: Trade Hopes Revive Global Stock Rally; Pound Rewards Brexit Shift

Key Events

Global equities and futures on the S&P 500, Dow and NASDAQ 100 resumed a risk-on rally this morning, as U.S. Treasurys and the yen extended a selloff. China's Vice Premier Liu He's visit to Washington to continue trade talks swayed the sentiment-pendulum back to the hopeful side—a shift that was also helped by upbeat service sector readings from both Europe and China.

The STOXX Europe 600 climbed for a fourth day, after the eurozone services PMI hit its highest level since December. Automobiles and miners outperforming once again. Technically, the price posted a fresh short-term peak, extending the uptrend since the late December bottom, to reach the highest level since early August. Through the rally, the gauge’s 50 DMA crossed above the 200 DMA, triggering a golden cross.

In the earlier Asian session, regional indices closed higher, after the Financial Times reported that U.S. and China negotiators were close to reaching an agreement, having resolved "most of the issues standing in the way of a deal."

China’s Shanghai Composite sealed a 1.24% advance after the country's services PMI beat expectations, further feeding a rally in iron ore. Hong Kong’s Hang Seng came in second with a 1.22% gain, followed by South Korea’s KOSPI, which climbed 1.2%. Japan’s Nikkei added 0.97% and Australia’s S&P/ASX 200 rallied 0.68%.

Global Financial Affairs

In yesterday’s U.S. session, all four major indices ended off their lows. The NASDAQ Composite was the only index to build on previous gains, edging 0.25% higher.

The S&P 500 closed flat, with strength in Real Estate (+0.86%) and Communication Services (+0.53%) offsetting a selloff in Consumer Staples (-0.82%) and Energy (-0.69%). Technically, the price paused after an upside breakout of a bullish pattern.

The Dow Jones Industrial Average gave back 0.3%, falling for the first time in four days, weighed down by a plunge in Walgreens Boots Alliance (NASDAQ:WBA) shares after reduced pharmacy reimbursement hit the drugstore chain’s earnings.

Technically, the index pared gains after finally joining the rally, making new highs for the post-Christmas uptrend and beating the Nov. 8 peak, to reach the highest close since Oct. 8. The fresh short-term uptrend high coincided with an upside breakout of a symmetrical triangle, bullish in an uptrend, and therefore suggests a continued rally to retest the October peak.

The Russell 2000 slipped 0.17%.

Yields on 10-year Treasurys jumped for the fifth day out of six, bouncing from the lowest level since December 2017. We consider the rally to be short-term, as it is an upward correction within a downtrend.

The Treasury slide lead to a dollar selloff, wiping out almost three days of gains. It’s interesting that despite the USD weakness and the broader risk-on mood, gold clung on to profits.

The pound strengthened for a third day as markets seemed to reward U.K. Prime Minister Theresa May's move to favor a cross-party approach with Labour Party leader Jeremy Corbyn to break a long-standing Brexit deadlock. Technically, the currency bounced off its uptrend line.

The price of WTI climbed for the fourth consecutive day, hitting a four-month high inches away the $63 mark, after OPEC+ oil producers signalled further supply tightening. Technically, the rally proves our calls over four small bullish pattern within a massive bottom.

Up Ahead

• India’s central bank will set policy on Thursday.
• The monthly U.S. jobs report on Friday is projected to show nonfarm payrolls were up 175,000 in March. Economists think the jobless rate held at 3.8 % with hourly earnings growing at a strong rate.
• Prime Minster Theresa May meets with leader of the opposition Jeremy Corbyn to resolve the Brexit impasse. She will also meet with leaders of devolved parliaments in Scotland and Wales.

Market Moves

Stocks

• The MSCI Asia Pacific Index rose 0.7%.
• The Euro Stoxx 50 Volatility Index slid less than 0.05%.

Currencies

• The Dollar Index fell 0.1%.
• The euro advanced 0.1% to $1.1217 and the largest gain in two weeks.
• The Japanese yen slipped 0.2% to 111.54 per dollar.
• The MSCI Emerging Markets Currency Index rose 0.3%.
• The Australian dollar advanced 0.6% to the strongest level in more than a week on the biggest rise in two months.

Bonds

• The yield on 10-year Treasurys rose four basis points to 2.52%.
• The yield on 2-year Treasurys climbed three basis points to 2.33%.
• Germany’s 10-year yield gained four basis points to -0.01%.
• France’s 10-year yield edged three basis points higher.

Commodities

• Brent crude rose 0.6% to $69.79 a barrel.
• Iron ore rallied 3% to $90.42 per metric ton.