Opening Bell: Futures, Stocks Pop On Global Recovery Narrative; Dollar Surges

Key Events/h2

US futures for the Dow Jones, S&P 500 and NASDAQ and Russell 2000 all opened higher on Wednesday as traders price in expectations for positive employment data, further stimulus, and a global recovery.

The Stoxx Europe 600 Index jumped on the open with all 19 industries up, led by chemicals and media.

Global Financial Affairs/h2

Expectations for more positive economic data are rising ahead of the jobs releases over the next few days—the private sector ADP (NASDAQ:ADP) release today, followed by tomorrow’s initial jobless claims, and Friday’s Nonfarm Payrolls.

Recent global economic data continues to show that the global economy is recovering from the COVID-19 devastation earlier this year. 

In the US, the Institute for Supply Management manufacturing data released on Tuesday hit its highest level in almost two years, confirming that the sector is expanding. 

In Europe, manufacturing activity also grew even though Spain lagged, falling back into contraction territory.

Earlier, Chinese factory data showed rising global demand for exports.

Yesterday, the Fed reinforced Chairman Jerome Powell's message that stimulus will remain for the long term. Fed Governor Lael Brainard said that the Fed should infuse even more stimulus to make good on its vow for stronger job growth and higher inflation.

This provided a positive backdrop to another tech rally on Wall Street, which drove US markets to new record highs on Tuesday. Yesterday it was the turn of Zoom (NASDAQ:ZM) to provide the impetus.

The video conferencing app announced significantly better than expected second quarter results as it continued to benefit from the new work-from-home environment. The stock opened 35% higher and topped 40% in the same session, bringing the overall increase for shares during the quarter to an incredible 1,000%.

Apple's (NASDAQ:AAPL) stock split paved the way for more gains for the iPhone maker as analysts raised their price targets. The stock jumped almost 3% at the open, increasing gains to 4% by the close.

Treasury yields, including for the benchmark 10-year note, fell for the third straight day yesterday as the market realized that that higher inflation would weigh on longer-date bonds. Treasuries are more sensitive to the erosive effect of inflation.

While attempting to recover, rates found resistance by the broken bottom of the rising channel, paring the advance.

The dollar jumped for the second day, following the positive manufacturing data print, aided by a weaker euro after German retail sales fell 0.9% in July, dispelling the notion that household spending in Europe’s economic steam engine would spur a recovery in the third quarter.

From a technical standpoint, the dollar jump is an upward corrective move after completing back-to-back bearish patterns, after falling through a descending channel since the March top, showing the downtrend could be steepening.

Gold has been pressured for the last two days by the strengthening dollar.

Still, the precious metal managed to find support by the late-August congestion, demonstrating continued demand after potentially completing a bullish pennant. 

Much like gold, Bitcoin was weighed down by the stronger dollar as well.

The cryptocurrency is potentially forming a H&S top.

Meanwhile, Ethereum is eating Bitcoin's lunch. 

It's hitting it's highest level versus BTC since Dec. 31, 2018 and is going for a rounding bottom, whose completion would imply another 60% rally.

Counterintuitively oil opened higher, rising for the second day, ahead of US crude oil inventories which are expected to soar to 1,877M from -4.689M.

While trading in an extremely tight range, oil has gained 13.1% since the July 30 low, demonstrating there is in fact movement for the commodity. The price is developing a pennant, bullish after the 5.5% rise in just three sessions. Previously, it presumably ranged between bulls who want to cash out and new bulls who want to gain cash.

An upside breakout would imply a $2.30 advance from the point of breakout.

Up Ahead/h2

• Eurozone retail sales data for the month of July will be released on Thursday.
• US unemployment data is due on Friday.

Market Moves/h2

Stocks/h3

• The Stoxx Europe 600 Index gained 1.4%.
• Futures on the S&P index advanced 0.5%.
• NASDAQ futures climbed 1%.
• Australia's ASX 200 Index surged 1.8%.

Currencies/h3

• The Dollar Index increased 0.25%.
• Sterling was little changed at 0.8903 per euro.
• The Japanese yen weakened 0.1% to 106.06 per dollar.
• The Indian rupee weakened 0.3% to 73.118 per dollar.

Bonds/h3

• The yield on 10-year Treasuries advanced one basis point to 0.68%.
• Germany' s10-year yield sank three basis points to -0.45%.
• The UK's 10-year decreased three basis points to 0.267%.
• Belgium's 10-year sank three basis points to -0.192%.

Commodities/h3

• West Texas Intermediate crude advanced 0.8% to $43.12 a barrel.
• Gold weakened 0.6% to $1,958.43 an ounce.
• Silver weakened 1.4% to $27.71 per ounce.
• Iron ore gained 1.8% to $121.69 per metric ton.