Opening Bell: Dollar, Metals, U.S. Futures Advance On Trade Talk Hopes


  • Optimism on renewed US-China trade talks buoys markets
  • Euro advance halts; USD moves higher
  • Signs indicate China is propping up the yuan ahead of trade negotiations
  • Bond shorts hit new record, as traders bet on increased rates

Key Events

Continuing hopes that Sino-US trade negotiations scheduled for later this week would this time bear fruit are currently boosting US equity futures for the , and . Shares in Europe are also tracking higher on gains in the earlier Asian session for China’s and Hong Kong’s indices. The euro’s advance halted.

STOXX600 Weekly

This morning the opened higher, rebounding from Friday’s disappointing session, led by miners. Technically, the pan-European stock index has been contracting since late May, as markets await a resolution of the trade dispute.

With what last week looked like an escalating trade war between the US and China creating a dismal outlook for global economic growth and lowering demand for commodities, the renewal of hopes for an end to the tiff has been boosting commodity prices during today’s trade. As of this writing, , , , and are all advancing.

Japan’s and broader both dropped 0.3 percent, as trading volume fell to their lowest levels since April, amid a selloff in chipmakers, following Friday’s decline in US sector counterparts.

The Shanghai Composite and Hang Seng led the regional advance, finishing well ahead of Asian peers, jumping 1.11 percent and 1.38 percent respectively. Clearly, they have the most to gain from successful trade talks.

Global Financial Affairs

Friday’s US session saw stocks rise, even on a sell-off in chip-related stocks. Tech hardware and export-reliant sectors, such as and rebounded after news broke about the US-China trade sit-down.

EURUSD Daily

EURUSD Daily

The dollar’s two-day slide ended, as the euro—with a 57.6 percent weighting in the basket of currencies that make up the —stopped its three-day advance. Technically, earlier this month, the single currency completed a bearish symmetrical triangle.

USDCNY Daily

USDCNY Daily

Earlier today the climbed, amid signs China is propping up its currency just as it prepares to restart trade negotiations with the US. Technically, both the daily MACD and RSI provided sell signals, while the weekly RSI reached the most oversold condition since November 2016, after the yuan weakened to its lowest point since January 2017.

In other FX market developments, the once again slipped, though as of this writing the currency has rebounded. The country’s markets will be closed for most of this week in observance of the Eid al-Adha holiday, with the possibility of low trading volumes and even sharper than usual currency swings as a result. Other emerging market stocks and currencies rose as the trading week began.

Bond traders, by increasing short-selling to a record level as the yield curve pushed back to its lows of the cycle, are betting recent market turmoil won’t throw the Federal Reserve off its . They expect the Fed will raise rates at its next meeting.

UST 2Y vs 10Y Yield Curve Weekly 2007-2018

UST 2Y vs 10Y Yield Curve Weekly 2007-2018

This week’s Jackson Hole symposium could provide clues as to whether such confidence is warranted as the spread between and yields narrowed on Friday to its slimmest since 2007. A flattening yield curve stokes fears of a dismal outlook for economic growth.

Up Ahead

Market Moves

Stocks

Currencies

Bonds

Commodities

  • The gained 0.2 percent.
  • slipped 0.04 percent to $65.19 a barrel.
  • LME advanced 0.8 percent to $5,974.50 per metric ton.
  • increased 0.2 percent to $1,186.48 an ounce.



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