Investing.com | May 22, 2019 09:43
European stocks were trading in a holding pattern and futures on the S&P 500, Dow and NASDAQ 100 pared much of yesterday’s gains at the opening, as investors awaited further trade war developments after reports the Trump administration was mulling extending Huawei-style restrictions to Chinese video surveillance firm Hikvision.
By the late European morning session, the STOXX 600 managed to climb into green territory—with personal and household goods offsetting declines in real estate.
Earlier, the news of potential additions to the U.S. trade blacklist weighed more markedly on Asian markets. China’s Shanghai Composite slipped 0.49% and Japan’s Nikkei 225 erased a 0.48% climb at the open, to close barely positive (+0.05%).
Conversely, Australia’s S&P/ASX 200 (+0.16%) held near an 11-year high after the announcement of looser home mortgage requirements and of a possible interest rate cut from the Reserve Bank of Australia in June.
h2 Global Financial Affairs/h2In yesterday’s U.S. session, stocks rebounded on the news the White House had partly lifted restrictions on Huawei for three months, boosting trade-sensitive sectors.
The S&P 500 sealed a 0.85% gain. Materials (+1.54%) outperformed, followed by Technology (+1.23%) and Industrials (+1.18%). Consumer Staples (-0.21%) was the only sector in red, while Utilities (+0.19%) fared as the second-worst performer after hitting an all-time high on Monday.
Technically, the SPX climbed toward the top of a pennant and found resistance by the 50 DMA, and the 100 DMA stopped below the 200 DMA.
The Dow Jones Industrial Average bounced 0.77% to the top of its pennant-shaped trading pattern, where it reiterated the resistance since Friday. Meanwhile, the climb pulled the 100 DMA over the 200 DMA.
The NASDAQ Composite leaped +1.08%, bouncing off the bottom of its own pennant formation, yanking the 100 DMA over the 200 DMA.
The Russell 2000 (+1.27%) outperformed its U.S. peers, resuming a trend that contradicts the market narrative whereby trade is the single biggest headwind at present. We've suggested that, perhaps, the strengthening dollar is the real story.
Meanwhile, the VIX fell to its lowest level in two weeks—but it may have followed a trend reversal, suggesting the current decline is a correction within a rising trend.
Overall, we have been warning against trading based on the U.S.-China trade narrative since the dispute between the two economic powers started about a year ago, and as recently as yesterday we advised traders not to buy into risk-on, arguing that the temporary lift on the Huawei ban seemed like a small band aid over an expanding wound.
Elsewhere, St. Louis Fed President James Bullard told Bloomberg that it’s premature to talk about a rate cut but admitted the Fed's recent hike may have been too restrictive—which made the current Treasury rate suddenly look attractive. The Increase in Treasurys demand that ensued pushed yields on 10-year notes back lower after a three-day advance.
The greenback advanced alongside government bonds ahead of the release of minutes from the last FOMC monetary policy meeting, resuming an advance on a breakout of an ascending channel, as it takes on the April 26 peak. This morning, though, yields were seen slightly higher and the USD mildly lower.
On the other side of the Atlantic, the British pound fell to the lowest level since Jan. 3 after U.K. Prime Minister Theresa May offered parliament a vote on holding a second Brexit referendum. The news initially propelled cable higher, but gains quickly turned into losses after key conservative lawmakers criticized the move, stepping up calls for May's resignations.
In commodities, oil fell for the second day on rising U.S. crude inventories.
h2 Up Ahead/h2Stocks
Currencies
Bonds
Commodities
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.