Opening Bell: Stocks Bounce Back From Trade Blues; USD, Oil Race Ahead


  • Carmakers boost European equities, US futures point to rebound from Asian weakness

  • Australian shares confirm outperformance over US-China trade war

  • US stocks cap five weeks of gain on positive economic and earnings data

  • Dollar hits 13-month high

Key Events

European shares and futures on the , and crawled higher on Monday, as investor mood eased after the latest US-China trade salvos impacted Asian markets.

The pan-European gained ground, with carmakers and telecommunications companies offsetting losses in bank shares, which were dragged lower by HSBC (NYSE:)’s disappointing . The outperformance of auto stocks is particularly surprising if we consider that heightened trade tensions are set to hurt car exports in particular.

Earlier, during Asian trade, Japan’s dropped 0.56 percent, for a total three-day slide of 2.1 percent.

China’s underperformed, plunging 1.29 percent, bringing its combined six-day fall to almost 6 percent.

Hong Kong’s managed to buck the trend, rising 0.52 percent.

South Korea’s was flat, retreating less than 0.05 percent.

Australia’s gained 0.61 percent. The Aussie benchmark hit a 10-year high in July and steadily outperformed its regional peers since the start of the US-China trade spat, despite its dependency on the Chinese market. Several reasons can explain this outperformance:

1) Australian shares have been considered underpriced, as they stand far away from their record levels.

2) The financial sector has enjoyed a reversal after plunging on customer abuse investigations at the country’s four largest banks.

3) A weak favors both equities and tourism.

4) China’s efforts to curb pollution led to a shift to higher-quality —and Australian’s speciality.

Global Financial Affairs

S&P 500 Daily Chart

Friday’s US session capped a fifth straight weekly gain for both the and the . The performance of the Dow is noteworthy, as the mega-cap companies listed on the index are dependent on exports for continued growth: traders seem to have prioritized actual economic and corporate performance over trade worries.

ticked 157,000 higher in July, missing the 190,000 estimate, but the overall jobs report was favorable. The fell one-tenth of a percentage point to 3.9 percent. edged 2.7 percent higher year-on-year and June’s jobs numbers were revised higher, from 244,000 to 248,000. Average gains for the three-month period were 224,000.

The upbeat US economy and recent corporate earnings beats helped President Donald Trump defend his tariffs hardline and re-instate that the country is winning the trade battle. The question investors must be asking themselves now is whether Trump’s renewed rhetoric could undo the country’s robust macro and micro fundamentals.

Meanwhile, Beijing said it is prepared to cope with the economic fallout of the trade war. Chinese policymakers stepped in to support the on Friday, helping a rally, after a record string of weekly losses saw the currency close at 7 per dollar. The renminbi later pared some of those gains.

DXY Daily Chart

DXY Daily Chart

The climbed for the fourth session out of five, to reach 0.15 percent from the June 28, 95.39 close, the highest level in almost 13 months. Technically, the USD is nearing the top of an ascending triangle, bullish with an upside breakout, demonstrating that demand has absorbed all the available supply and is poised to bid prices higher.

The yield on Treasuries steadied at 2.95 percent.

WTI Daily Chart

WTI Daily Chart

climbed above $69, even against the headwind of a stronger dollar. Technically, however, its climb is within a descending triangle, bearish with a downside breakout, suggesting supply has absorbed all of the demand and is prepared to go lower.

Up Ahead

  • Earnings season continues with:

    • Disney (NYSE:), after market close, $1.97 EPS forecast, VS $1.58 for the same quarter last year

    • Twenty-First Century Fox (NASDAQ:), after market close, $0.53 EPS forecast, VS $0.36 for the same quarter the previous year.

  • Canada’s for July is released Tuesday.

  • The Reserve Bank of Australia is forecast to at record lows and confirm its the long-term guidance on Tuesday

  • The Bank of Japan releases minutes from its July 30-31 meeting on Wednesday.

  • The preliminary reading of Japan’s is out on Thursday. Economists expect a robust rebound from the first-quarter contraction.

  • Analysts expect data due on Friday will show a pick-up in US in July

Market Moves

Stocks

  • Canada’s is closed Monday for a civic holiday.

  • The Stoxx Europe 600 increased 0.2 percent.
  • Futures on the S&P 500 climbed 0.1 percent to the highest level in more than a week.

  • The fell 0.1 percent.

  • The slipped less than 0.05 percent.

Currencies

  • The Canadian was down 0.27 per cent against the U.S. greenback early Monday, trading at 0.7676.

  • The Dollar Index gained 0.15 percent.

  • The dropped 0.1 percent to $1.1556, reaching the weakest level in almost six weeks on its fifth straight decline.

  • The slipped 0.1 percent to $1.2993, the weakest level in 11 months.

  • The fell 0.1 percent to 111.33 per dollar.

Bonds

  • Canada’s was steady early Monday at 2.353.
  • The yield on 10-year Treasuries gained one basis point to 2.95 percent.

  • Germany’s yield climbed one basis point to 0.42 percent.

  • Britain’s yield climbed one basis point to 1.329 percent.

Commodities

  • The fell 0.2 percent.

  • West Texas Intermediate crude climbed 0.4 percent to $68.78 a barrel.

  • LME dipped 1.3 percent to $6,124.50 per metric ton, the lowest in more than two weeks.

  • declined 0.2 percent to $1,212.69 an ounce.



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