U.S. Opening Bell: USD Shines; Oil Pops On Supply Cuts; Global Stocks Weaken

Key Events

European stocks slipped lower and futures on the S&P 500, Dow and NASDAQ 100 wavered this morning, after shaking off Asian market weakness this morning. The dollar leaped, and oil is set to end a ten-day selloff.

The STOXX 600 gave up a strong opening that was boosted by gains in shares of commodities producers which tracked the climb in oil prices. After initially opening 0.17 percent higher and extending the advance to 0.6 percent, the pan-European benchmark lost 0.26 percent, with no apparent cause as of 4:07 EDT.

Earlier, the Asian session was beset by volatility, with the MSCI Asia-Pacific Index dropping 1.19 percent. Most regional benchmarks opened lower as signs of softening demand in China—underpinned, among others, by the forward outlook posted by one of the country's retail giants, Alibaba (NYSE:BABA)— rekindled anxiety about the outlook for world growth. However, an optimistic outlook on key economic data coming out this week, such as industrial production figures from China and Japan, may have convinced dip buyers to pull prices off their lows.

Japan’s Nikkei 225 started 0.6 percent lower and extended the drop to 0.9 percent, but later managed to eke out a thin 0.09 percent higher close.

China’s Shanghai Composite opened 0.22 percent lower. Unlike the Nikkei, it averted bigger losses, to rebound 1.22 percent after Chinese Premier Li Keqiang announced Beijing will further open the domestic economy to stave off rising protectionism. Hong Kong’s Hang Seng started higher and kept advancing. However, it lost its upward momentum and closed flat.

Global Financial Affairs

US majors slid on Friday as the on-again, off-again tech stock rout picked up after disappointing corporate results, dragging the NASDAQ 100 1.67 percent lower. However, on a weekly basis, shares advanced. This is the second consecutive week that saw gains, only to have equities sink on Friday. Although two negative closes at the end of the trading week are insufficient to mark a pattern, investors should ask themselves whether they signal a build up of uncertainty, as traders are unwilling to be locked into positions over the weekend.

The Dow Jones Industrial Average outperformed its peers, both over the one-week and two-week period. The Russell 2000 posted a mirror-image trajectory, underperforming over the same two timeframes. This seems to underscore trader conviction that trade uncertainty—which would favor stocks of domestic companies over export-sensitive mega-cap shares—is not an immediate threat.

The greenback jumped on last week's favorable US data, including Friday’s PPI and the Fed’s policy guidance following the FOMC meeting, all pointing to higher interest rates. The USD is currently trading at the highest level since June last year.

Meanwhile, savvy traders won’t have Treasury data to analyze as bond markets remain closed for Veterans Day. The yield on 10-year notes dropped five basis points to 3.19 percent, creating the potential for a double top.

Oil prices are on track to snap a 10-day straight loss, though giving up biggest early gains. Crude is at the lowest level since March, and the 50 DMA crossed below the 100 DMA. Traders in this space may need further signs of bigger supply cuts to continue driving prices up.

Up Ahead

• San Francisco Fed President Mary Daly speaks on the economic outlook at a regional development conference in Idaho Falls on Monday
• Tuesday marks the deadline set by the EU for Italy to revise its budget
• Chinese industrial production and retail sales data due on Wednesday
• Also on Wednesday, 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.
• Policy decisions are coming from central banks in Mexico, Philippines, and Thailand.

Market Moves

Stocks

• Italy’s FTSE MIB was little changed.
• The UK’s FTSE 100 jumped 0.7 percent to the highest level in almost five weeks.
• The MSCI All-Country World Index slipped 0.2 percent.

Currencies

• The Dollar Index climbed 0.52 for a combined three-dayadvance of 1.48 percent to the highest level in 18 months.
• The euro slid 0.7 percent to the weakest level in almost 17 months on the largest decrease in more than six weeks.
• The British pound fell 0.9 percent to $1.2859, the weakest level in more than a week on the biggest dip in more than seven weeks.
• The Japanese yen dropped 0.3 percent to 114.13 per dollar, the weakest in almost six weeks.

Bonds

• Germany’s 10-year yield lost one basis point to 0.40 percent, the lowest level in more than a week.
• Italy’s 10-year yield advanced less than one basis point to 3.406 percent, the highest level in more than a week.
• Britain’s 10-year yield gave up two basis points to 1.491 percent, the lowest level in more than a week.

Commodities

• West Texas Intermediate crude climbed 0.65 percent, giving up an earlier 1.6 percent advance, the first in more than two weeks and the largest gain in six weeks.
• Brent crude advanced 2.2 percent to $71.74 a barrel, the first gain in a week and the biggest gain in six weeks.
• Copper gained 0.1 percent to $2.69 a pound.
• Gold slipped 0.3 percent to $1,205.43 an ounce, reaching the weakest level in more than a month on its seventh consecutive decline.