Opening Bell: Investors Cash Out On Trade, Political Fears; WTI Pops


  • Futures, European shares rebound from Asian weakness following US declines yesterday
  • Investors hike their cash positions, shunning safe-haven yen, gold, dollar and Treasurys

  • US stocks slip across the board, dragging both defensive and growth sectors lower

  • WTI heads higher on OPEC, Russia’s reported reluctance to step up output

Key Events

Global stocks and futures for the , and were mixed this morning as investors struggled to find stable footing amid multiple headwinds: globally, the perceived threat to the worldwide growth trajectory caused by an unrelenting US-China trade war; in the US, rising interest rates and heightened uncertainty stemming from ongoing political developments.

However, both European shares and US futures contracts were seen edging higher later in the session, pointing to a rebound from extended Asian weakness.

STOXX 600 Daily Chart

STOXX 600 Daily Chart

Banks and healthcare shares helped the pan-European trim yesterday’s losses and halt a six-day losing streak. Technically, supply overcame demand upon reaching the downtrend line since July 31.

Earlier, during Asian trade, most regional benchmarks slipped lower. Japan’s bucked the trend, climbing 0.15 percent to the highest level since late-January, just 0.8 percent away from levels last seen in December 1991.

China’s shed 0.58 percent on the new batch of US tariffs. Property shares tumbled, mirroring the declines seen yesterday among their US counterparts, as local provinces are considering whether to scrap the property pre-sale system that allowed developers to secure funds even while projects are still under construction.

Global Financial Affairs

Yesterday, worries that the US-Sino trade dispute would end the first synchronized global growth in a decade were reignited after China refused to meet with US representatives unless the Trump administration stopped threatening to impose further tariffs. Further weighing on stock performance were reports that US Deputy Attorney General Rod Rosenstein, who oversees a probe into Russia’s interference with the 2016 US presidential election, could soon leave his post.

The dropped 0.35 percent, extending the over 0.7 percent take-profit correction that followed the index’s new all-time-highs. (-1.71 percent) and (-1.4 percent) both slid on the trade war escalation. stocks (-1.96 percent) underperformed, while shares (+1.46 percent) outperformed on the back of ‘s price surge following the decision, by OPEC and NOPEC oil producers, to refrain from stepping up production to offset potential Iran supply glitches. (-1.53 percent) also fell, underscoring investor eagerness to cash out.

The , whose listed mega-cap firms depend heavily on foreign markets, was Monday’s worst performer, giving up 0.68 percent. The slipped 0.41 percent. The was the only US major closing in positive territory, edging 0.08 percent higher.

DXY Daily Chart

DXY Daily Chart

Despite the prospect of looming and the increased trade risk, the seems unable to climb back up above 95.00, where it found support for over two months. Perhaps the Fed’s expected on Wednesday is already fully priced in, or the greenback is loosing its shine as the go-to safe haven in times of trade uncertainty.

Interestingly, traders are also not seeking refuge in the , which fell for the fourth straight day against the USD. A close at this level would mark the lowest level for the Japanese currency since January.

is flat, which suggests that investors are also shunning the yellow metal’s trademark safety.

Meanwhile, yields on Treasurys reached 3.104, just under 0.8 percent away from their highest level since July, as investors sold off their bond holdings. If we also consider yesterday’s equity losses, it appears that traders have held onto cash.

WTI Daily Chart

WTI Daily Chart

reached the halfway point to $73 after OPEC and Russia were seen unwilling to step up their production to offset a potential shortage stemming from Iran’s sanctions. crossed over the $80 level, a resistance level since mid-May, hitting a four-year high. Technically, WTI extended a penetration to an H&S bottom neckline. This upward trajectory could signal a new era for energy prices.

Up Ahead

  • Japanese Prime Minister Shinzo Abe meets with President Donald Trump in New York to discuss trade on Wednesday

  • Also, on Wednesday, the FOMC’s monetary policy decision will be followed by a with Chairman Jerome Powell

  • Thursday sees US , data and coming out.

  • Bank of Canada Governor Stephen Poloz speaks on Thursday.

  • Canadian for July, and and for August are released on Friday.

    Market Moves

All prices correct at time of writing

Stocks

  • Canada’s closed down 0.10 percent Monday.

  • The STOXX Europe 600 gained 0.2 percent.

  • Futures on the S&P 500 gained less than 0.05 percent.

  • The UK’s ticked 0.3 percent higher.

  • Germany’s climbed 0.2 percent.

  • The slipped 0.2 percent.

  • The gained 0.2 percent.

Currencies

  • The Canadian was down 0.04 percent against the U.S. greenback early Tuesday, trading at 0.7716.

  • The Dollar Index inched less than 0.05 percent higher to the highest level in a week.

  • The climbed 0.1 percent to $1.1756.

  • The dropped 0.1 percent to $1.3104.

  • The Japanese yen lost 0.1 percent to 112.91 per dollar, the weakest level in more than eight months.

Bonds

Commodities

  • West Texas Intermediate crude gained 0.2 percent to $72.26 a barrel, the highest level in almost four years.

  • Gold ticked 0.1 percent higher to $1,199.94 an ounce.



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