Opening Bell: Futures, Stocks Sink As U.S.-China Tensions Rise; Silver Pops

Opening Bell: Futures, Stocks Sink As U.S.-China Tensions Rise; Silver Pops

Investing.com  | Jul 22, 2020 11:57

  • Global markets drop as Sino-US tension rise
  • Gold and Silver jump
  • Yields dip

Key Events

US futures for the S&P 500, Dow Jones, NASDAQ and Russell 2000 all slumped on Wednesday, and European stocks dropped after the Trump administration abruptly ordered the closure of China's consulate in Houston, Texas late Tuesday, accelerating tensions between the world's two larges economies. As well, markets have been reacting to the US President's remarks yesterday that the coronavirus outbreak "will get worse before it gets better.”

The dollar fluctuated after a selloff, pushing gold and silver frenetically higher. Oil retreated after a rally.

Global Financial Affairs

Contracts on the major US indices gave up early gains, as risk-on sentiment dissipated, after President Donald Trump adopted a more dire tone regarding the seriousness of the COVID-19 pandemic during a briefing yesterday. Adding to the negative mood: the US Center for Disease Control published a report that the number of cases across the US is much higher than officially reported, due to a lack of robust testing, along with data-collection issues.

This morning's consulate closure comes after the US accused the Asian nation of attempting to steal coronavirus vaccine research. A spokesman for China's Foreign Ministry described the action as, “a political provocation unilaterally launched by the US.” He added, “China urges the U.S. to immediately rescind its erroneous decision, otherwise China will undertake legitimate and necessary responses.”

From a technical perspective, if S&P 500 futures fall a bit more, they’ll provide a bearish confirmation to yesterday’s shooting star.

Following yesterday’s contradictory market narratives, the STOXX Europe 600 Index was pulled lower by defensive equities, which should outperform in a risk-off environment. Today’s selloff comes just one day after investors drove the benchmark to its highest point since early March.

STOXX 600 Daily

The pan-European index opened lower on Wednesday, creating a falling gap, reversing the bullish expectations of yesterday’s rising gap. This completed a shooting evening star, or Island Reversal.

Three factors make this pattern especially hazardous: (1) the shooting star closed precisely below the 200 DMA, after a significant rally above it, (2) resistance by the broken uptrend line since the March low and (3) the June 5 high (red dotted line) proved an unassailable pocket of supply. At this point, we expect the dip to be only temporary, after the index completed a bullish pennant. If, however, the pennant fails to support the price, the RSI suggests momentum is on the cusp of a H&S top.

Asian indices finished in the red with one exception. After a brief period during which it lagged, China's markets returned to defying global trends; the Shanghai Composite climbed for the fourth day in a row, adding 0.4% today. Beijing’s capital market reforms offset rising US-China tensions.

At the opposite end of the spectrum, Hong Kong’s Hang Seng underperformed, losing 2% as local COVID infections hit a daily record.

Tuesday on Wall Street, American shares squeezed out a third day of gains. Nevertheless, indices finished well off session highs as Congress and the White House were visibly at odds over the latest pandemic aid bill. As well, Senate Majority Leader Mitch McConnell cast doubt on the legislative body's ability to an accord before current benefits expire at the end of July.

The S&P 500 Index rallied. Energy and Financials each reached new four-month highs, and the NASDAQ Composite notched another all-time high intraday, before closing lower, as tech stocks led declines just a day after their biggest rally since April.

Yields, including for the 10-year Treasury, fell for the third straight day, to the lowest level since April 21—exactly the opposite of US equities, which have returned to pre-coronavirus levels.

UST 10Y Daily

The RSI confirms the rate's inability to trend higher. It's likely to retest the 0.5% record low.

Falling yields pressured the dollar and the euro extended its uptrend after closing above its Mar. 9 high.

EUR/USD Weekly

The next test for the single currency is the falling trend line in place since 2008, at 1.17, as per the current angle.

Gold rose to the highest point since September 2011. It's now just 1.2% from its $1920 record.

Gold Daily

Still, the yellow metal is trading well off its recent highs. If the price remains at these levels by today's close, it will have produced a shooting star, signaling a potential return-move after the bullish flag, whose development broadened the rising channel, which was too narrow to be sustainable.

Silver jumped to more than a six-year high. Like gold, it also gave up most of its gains. However, the white precious metal's application for industrial use, plus its undervalued status, which is about 125% below all-time highs, makes it a far better investment than gold.

Oil trimmed yesterday's jump.

Oil Daily

The move completed an ascending triangle and closed above the potent resistance of the Mar. 9 falling gap that erased a quarter of WTI’s value. It took the contract over six weeks to break through it. The 200 DMA is still looming above.

Up Ahead

Market Moves

Stocks

Currencies

  • The Dollar Index was little changed.
  • The euro was little changed at $1.1528.
  • The British pound fell 0.3% to $1.2688.
  • The onshore yuan weakened 0.3% to 6.998 per dollar.
  • The Japanese yen weakened 0.1% to 106.87 per dollar.

Bonds

  • The yield on 10-year Treasuries fell one basis point to 0.59%.
  • The yield on two-year Treasuries decreased less than one basis point to 0.14%.
  • Germany’s 10-year yield declined one basis point to -0.47%.
  • Britain’s 10-year yield sank one basis point to 0.126%.
  • Japan’s 10-yearyield dipped one basis point to 0.018%.

Commodities

  • West Texas Intermediate crude declined 0.9% to $41.56 a barrel.
  • Brent crude decreased 0.7% to $44.01 a barrel.
  • Gold strengthened 0.7% to $1,855.28 an ounce.

Investing.com

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

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.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+

Download the Investing.com App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.

Investing.com is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.

';