U.S. Opening Bell: Futures Waver With European Stocks; Yields, Gold Rally

Key Events

US futures on the Dow, S&P, NASDAQ and Russell 2000 were pressured in the European session on Wednesday as investors sought direction after US stocks slumped during Tuesday's Wall Street session by the most in a month, following Federal Reserve Chair, Jerome Powell’s comments at a town hall. 

The dollar was steady.

Global Financial Affairs

All four US contracts were in the red this morning, paring gains achieved during the positive Asian session. Dow futures were the hardest hit though Russell 2000 futures extended a four-day selloff of the underlying gauge. Investors seemed to have given up hope that there will be a V-shaped economic recovery. Many market analysts indicated such a recovery was likely to occur when the economy reopened as coronavirus restrictions were lifted. 

However, Federal Reserve Chair Jerome Powell's sober comments yesterday felt like an icy splash of water on investors’ faces. The Fed boss must have shocked some listeners when he said that "we are not simply going back to the economy that we had before the pandemic" adding that the coronavirus will be with us “for a while.” Accordingly, defensive sectors were the only sectors in the green, while economicly sensitive, value stocks underperformed. 

European stocks whipsawed. The STOXX 600 Index opened 0.05% higher on dip-buying of reflationary travel and leisure sectors and positive UK data which showed that consumer prices there increased 2% YoY, down from 2.5% a month earlier. Britain’s FTSE 100 also gave up a 0.2% advance as the pound turned stronger.

Still, GBP's rise will be tested, since the pair has fallen below the 200 DMA, after being pushed down by the 50 DMA, which is heading toward a Death Cross. That would coincide with the currency’s completing a top.

Sterling initially rose after the CPI data release. However, it appears the neckline of the potential top holds a line on demand, for now.

Asian equities enjoyed a rebound, even after the slide in US shares, which was exacerbated by disappointing US retail sales—cementing the argument for a disruption in growth.

China’s Shanghai Composite outperformed, jumping 1.1% despite the the country's significant tech regulatory clampdown. This once again confirms something we've noted previously: Chinese stocks are often impervious to setbacks even when other markets ironically sold off over Chinese risks.

Even now, surveying global exchanges, there is a sense of caution, as risk assets trade in a holding pattern, with a growing sense of foreboding that the Fed will begin removing stimulus in the near future. To that effect, investors are looking to today's Fed minutes for any further indication of the path to tapering via its bond buying program.

However, the real show will be the Fed’s conference at Jackson Hole, which will take place from Aug. 26 through 28. This symposium has historically proven to be an important event that can serve as a catalyst for the next serious market move.

Meanwhile, investors loosened their grip on the 10-year Treasury note, allowing yields to edge higher for the first time after a 4-day decline.

Yields rebounded sharply off their lows in the first two days of the week, displaying impressive support, which could turn into a H&S bottom. For now, however, the Death Cross is applying resistance so we are in a holding pattern.

The dollar was pegged against yields and remained in the same holding pattern.

The greenback is being held in a vice between the completion of a massive double bottom and a much smaller double top. However, the Golden Cross, in a mirror image to the Death Cross seen for yields, is keeping us bullish.

And, in turn, gold is pegged against its base currency, the dollar. 

The yellow metal was little changed, having given up earlier gains. It found resistance by the 50 DMA for the second day, after yesterday’s High Wave candle, near the top of a falling channel.

Bitcoin found its footing at the bottom of a rising channel.

However, the cryptocurrency found resistance by the 200 DMA.

Oil rebounded from a four-day selloff, after the American Petroleum Institute reported falling inventories, which offset the view of lower summer demand amid the pandemic. Still, we expect that to be short-lived.

WTI is on the verge of completing a Descending Triangle.

Up Ahead

• The Bank Indonesia interest rate decision will be announced on Thursday. 
• On Thursday the Philadelphia Fed publishes its manufacturing index. 
• The UK and Canada report retail sales figures on Friday. 

Market Moves

Stocks

• The FTSE 100 fell 0.3%
• The STOXX 600 was little changed
• Futures on the S&P 500 were little changed
• Futures on the NASDAQ 100 were little changed
• Futures on the Dow Jones Industrial Average fell 0.2%
• The MSCI Asia Pacific Index rose 0.4%
• The MSCI Emerging Markets Index rose 0.4%

Currencies

• The Dollar Index fell 0.1%
• The British pound was little changed at $1.3749
• The euro rose 0.2% to $1.1728
• The Japanese yen was little changed at 109.55 per dollar
• The offshore yuan rose 0.1% to 6.4820 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 1.26%
• Britain’s 10-year yield declined two basis points to 0.54%
• Germany’s 10-year yield declined one basis point to -0.48%

Commodities

• Brent crude rose 0.8% to $69.56 a barrel
• Spot gold rose 0.4% to $1,793.44 an ounce