U.S. Opening Bell: Trade Uncertainty Pressures Global Stocks; Gold Moves Higher

Key Events

Futures on the S&P 500, Dow and NASDAQ 100 rebounded from an early slide this morning, while European shares remained under pressure from weak corporate results and conflicting headlines on U.S.-China trade negotiations.

The STOXX 600 swung between gains and losses in a tumultuous opening session: it opened around 0.1 percent lower following a mixed Asian session—tracking mixed reports about the outlook of trade talks. The pan-European index then jumped into positive territory, nearing 4-month highs, thanks to a Reuters report that Chinese and U.S. negotiators were nearing some draft commitments on a number of the most contentious issues of their 11-month old trade dispute.

Later, however, poor earnings reports pushed the benchmark back below opening levels. Technically, should the price close at the current weak levels, it would form a shooting star, bearish in an uptrend.

British multinational energy and services firm Centrica (LON:CNA) underperformed, plunging 11 percent, after it warned the recently-introduced national energy price cap will squeeze cash flow and hurt its financials this year.

Meanwhile, Danish Moeller - Maersk (CO:MAERSKb), the world's largest shipping company, tumbled 8.7 percent even after meeting analyst expectations, after it warned that trade war jitters may hurt future profits. Though we have no real answer, we can't help but wonder why investors would decide that the stock is worth almost 9 percent less, if at the same time they were bidding market prices up based on positive trade headlines?

Yields on 10-year Treasurys jumped, which is typically considered bullish for equities: investors would presumably sell safe-haven assets to reinvest in riskier assets. However, we expect yields to fall after they break out to the downside of a symmetrical triangle, bearish in a downtrend, whose top is pressured by the 50 DMA, after the 100 DMA already crossed below the 200 DMA. Such a breakout would be a bearish signal for equities, suggesting a trend in which investors seek safety over growth.

Germany's 10-year yields tracked U.S. Treasurys higher, while Japan's 10-year yields fell to their lowest levels since November 2016—when they began a sharp climb after newly-elected U.S. President Donald Trump revived the stock market's bull spirit. Has Japan's economy lost its momentum?

The greenback gave up an advance against the yuan, sliding for the third day and touching the lowest since mid July, even after coming back from a 0.44 percent decline.

Gold is trading near its highest price since May. It's difficult to attribute the trend to dollar weakness, considering the USD has been on an overall upward trajectory in February and just about 0.6 percent away from the highest level since mid December.

Global Financial Affairs

In yesterday's U.S. session, equities edged higher, with the S&P 500 eking out a seventh consecutive advance, after minutes from the last Fed monetary policy meeting showed policymakers are looking to halt quantitative tightening later this year. Moreover—and in stark contrast with Moeller-Maersk's bleak trade war-driven outlook—Caterpillar (NYSE:CAT) jumped after providing a positive view for Chinese demand, boosting the Materials sector.

While bets are rising for a resolution of the U.S.-China tariffs spat, Fed minutes fell short of lifting equities as much as when Chair Jerome Powell pronounced the words "patience" and "flexible," just a few weeks ago. This could indicate that this time the market narrative had already priced in the central bank's dovish turn.

However, we have been warning of a reversal. The 18%, post-Christmas U.S. stock jump is showing signs of running out of steam. Today's report from Reuters would have been a strong, positive catalyst just a month ago. Conversely, when good news is dismissed so precipitously, any bit of bad news threatens to throw the stock market into chaos.

Up Ahead

• Bank of Canada Governor Stephen Poloz speaks on Thursday
• ECB President Mario Draghi speaks on Friday
• Also on Friday, Reserve Bank of Australia Governor Philip Lowe testifies before the parliament.
• Prime Minister Theresa May is in Brussels to continue talks with President of the European Commission Jean-Claude Juncker. The clock is ticking for both sides to reach an agreement that will be palatable for the UK parliament. There are 36 days left to go before the UK exits the European Union, with or without a deal.

Market Moves

Stocks

• The U.K.’s FTSE 100 slipped 0.3 percent.
• Futures on the S&P 500 gained 0.1 percent to the highest in more than 11 weeks.
• The Stoxx Europe 600 dropped 0.1 percent.
• The MSCI Asia Pacific Index climbed 0.2 percent to the highest in almost 20 weeks.
• The MSCI Emerging Market Index ticked 0.3 percent higher to the highest in almost six months.

Currencies

• The British pound gained less than 0.05 percent to $1.3054.
• The Dollar Index edged 0.1 percent higher, the largest gain in a week.
• The euro advanced less than 0.05 percent to $1.1343, the strongest in two weeks.
• The Japanese yen increased 0.1 percent to 110.72 per dollar.

Bonds

• Britain’s 10-year yield advanced one basis point to 1.19 percent, reaching the highest in two weeks on its fifth straight advance.
• The yield on 10-year Treasuries climbed one basis point to 2.66 percent.
• Germany’s 10-year yield gained less than one basis point to 0.11 percent.

Commodities

• Gold advanced 0.1 percent to $1,339.85 an ounce.
• West Texas Intermediate crude climbed 0.2 percent to $57.29 a barrel, hitting the highest in more than three months with its seventh consecutive advance. The oil market is also being influenced by bottlenecked pipelines in Canada, maintenance issues in Saudi Arabia and the latest batch of Iranian export numbers.