Opening Bell: U.S., Europe Shares Reverse Asia Slump; Commodities Hit


  • European shares and US futures edge higher

  • Asian markets tumble to one-year low, ahead of Friday’s deadline for new US tariffs

  • STOXX Europe 600 jumps with automakers shares on reports of possible EU-brokered negotiations on trade

  • Euro inches higher on bets for faster ECB tightening and German manufacturing data beat

  • Pound weathers May’s Brexit setback

  • Singapore iron ore slips to lowest level since April on worsening trade outlook

  • WTI crude drops on supply-demand balance glitches

Key Events

US futures on the , and rebounded from an early drop on Thursday, after a rally in European shares helped shake off the earlier slump in Asian markets, where equities slipped to lows for the year. Investor focus is increasingly intensifying around a key trade tariff deadline coming up tomorrow, Friday, when US President Donald Trump is set to press ahead with levies on $34 billion worth of Chinese imports.

The pan-European leaped to their highest level in a week today, during the first half hour of trade, led by gains in auto shares. Reports that EU officials are seeking to broker a deal between the US and EU on car exports boosted the sector.

EUR/USD Daily Chart

EUR/USD Daily Chart

The initially jumped alongside European government bond yields, as traders re-priced the likelihood of the ECB tightening sooner than expected. The single currency was also buoyed by upbeat figures from the German Federal Statistics Office, which reported a 2.6 percent jump in industrial orders, obliterating the 1.1 percent forecast. The surprise data beat halted a series of underwhelming economic indicators from Europe’s most powerful economy for this year, sending yields on German sovereign bonds to a two week high.

However, the IMF lowered its forecast for German economic growth in 2018 to 2.2 percent from 2.5 percent, citing the headwinds of a global trade war and Brexit, which both threaten to disrupt market efficiency. Perhaps this less upbeat, bigger picture view stopped the euro rally from gaining traction.

Meanwhile, managed to eke out a gain even after UK Prime Minister Theresa May reportedly failed to seal her cabinet’s support on a third draft proposal for post-Brexit customs arrangements with the EU—a key stumbling block within Brexit negotiations. The lack of agreement details raises the risk that the UK stands to lose more than the EU member countries if an increasingly likely hard Brexit occurs. The pound weakened .

Global Financial Affairs

Earlier, during the Asian session, shares on all major regional indices except for Australia’s slumped to around their lowest levels in a year. Technical indicators painted a bearish picture.

Japan’s slid by a full percentage point after the 100 DMA crossed below the 200 DMA late June. Now, the 50 DMA is falling head first toward a collision with the 200 DMA. A Death Cross is set to execute, whose implication is as ominous as it sounds. Should the price fall below the March 26 trough at 1645.16, it will have reversed into a long-term downtrend.

China’s closed near the bottom of the session, 0.72 percent in the red, for a combined two-day decline of 1.8 percent. The mainland index, which is on track to close lower for the sixth week out of seven, is showing the same moving average interplay as the TOPIX. The price reached its lowest level since February 2016 and is now 3.4 percent away from its January 2016 trough. The next point on the index to watch is a 30 percent drop, to around 1850, which occurred in June 2013.

Hong Kong’s trimmed a 1.6 percent drop down to 0.67 percent, upon reaching 2.5 percent above the uptrend line since February 2016. South Korea’s lost 0.4 percent of value, reaching the lowest level since early May 2017 after swinging between 0.4 gains and losses of almost 1 percent.

Australia’s S&P/ASX 200 continued to outperform and to buck the region’s downward trend. It climbed over 0.5 percent on Thursday, closing near the high of the session, after dip buyers took advantage of yesterday’s selloff in financials shares, sending the sector higher. Technically, the price action on both days traded off the top and bottom of a pennant-shaped consolidation, considered bullish with an upside breakout.

Today’s mixed global stock performance follows an equally mixed session on Wednesday, when trading volume was 40 percent lower than the 30 DMA, as the US market was closed in observance of Independence Day.

The previous US session, on Tuesday, ended in the red. Weakness in technology and financial shares weighed on the major benchmark indices and wiped out earlier gains. The performance reversal was a reaction to a Chinese court’s temporary ban on Micron Technology (NASDAQ:) chip sales in the country, which exacerbated the already tense market sentiment ahead of this week’s looming tariff deadline.

Dow Jones Daily Chart

Dow Jones Daily Chart

The , whose listed mega caps are the most sensitive to trade war jitters as their growth relies on global markets, is developing a pennant, bearish upon a downside breakout, after sliding lower from the 25,400 level since June 11. Also worrying is the location of the pennant, below the 200 DMA (red). Note that the pennant is situated above the uptrend line since April, revealing the technical significance of this price level.

Iron Ore Daily Chart

Iron Ore Daily Chart

Commodities, also heavily exposed to international trade dynamics, slipped lower: in Singapore slid to their lowest level since April, after crossing below their uptrend line since June 2017.

In other commodity news, extended a decline after briefly crossing the key $75 level on Tuesday, as investors weighed the possible implications of tightening US supplies, against a pledge from Saudi Arabia to expand output.

The drop followed Trump’s fresh tweets aimed at OPEC oil producers to hike production. With a tough mid-term US election lurking, it’s essential for Republicans that the WTI price remains below $75 a barrel. Analysts point out that the ongoing lack of balance between limited supply and growing global demand only indicates that prices will keep climbing.

The American Petroleum Institute (API) reported on Tuesday that dropped by 4.5 million barrels in the week ending June 29—the key driver of WTI’s near-3-year spike on that same day. The Energy Information Administration (EIA) is expected to report that fell by another 5.2 million barrels during the same week, which would officially ratify a seventh straight weekly decline.

Oil Daily

Oil Daily

Technically, the price of WTI is trading according to a pennant, a continuation pattern, upon an upside breakout. Note the location of the pennant, at the very top of a rising channel since the beginning of the year, revealing the current dynamic is a potential final battleground between bulls and bears.

Up Ahead

  • Federal Reserve releases of its June 12-13 meeting today, when FOMC policy makers a quarter point for the second time this year and lifted the median forecast to four total increases in 2018.

  • The Canadian is released on Friday

  • The Canadian for May is released Friday.

  • Canadian for May is released Friday.

  • are due on Friday.

  • Also on Friday, the US is scheduled to impose tariffs on $34 billion-worth of Chinese goods. Beijing has said it will slap taxes on an equal-value amount of US exports, including agricultural and auto products.

Market Moves

Stocks

  • Canada’s rose 0.22 percent on Wednesday.

  • The STOXX Europe 600 Index climbed 0.4 percent, to the highest level in almost two weeks.

  • Futures on the S&P 500 advanced 0.4 percent, the most significant gain in a week.

  • The gained 0.1 percent.

  • The dropped 0.4 percent to the lowest level in a week.

Currencies

  • Canadian was up 0.07 per cent against the U.S. greenback early Thursday, trading at 0.7613.

  • The fell 0.12 percent to 94.40, the lowest level in more than a week, but paring a steeper 0.25 decline.

  • The euro gained 0.3 percent to $1.1692, the strongest level in more than a week.

  • The British pound advanced 0.1 percent to $1.3242, the strongest level in more than a week.

  • The slipped 0.2 percent to 110.66 per dollar.

  • The gained 0.2 percent to 4.6592 per dollar, the biggest gain in a week.

Bonds

  • Canada’s was up early Thursday at 2.170, a 0.32-percent increase.

  • The yield on Treasuries advanced two basis points to 2.85 percent.

  • Germany’s yield gained three basis points to 0.33 percent, the highest level in more than a week on the largest rise in more than three weeks.

  • Britain’s yield climbed two basis points to 1.277 percent, the highest level in more than a week.

Commodities

  • The slipped 0.3 percent to the lowest level in almost 21 weeks.

  • West Texas Intermediate crude lost 0.2 percent to $73.98 a barrel.

  • LME fell 0.1 percent to $6,377.00 per metric ton, the lowest level in 11 months.

  • slid less than 0.05 percent to $1,254.49 an ounce.



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